A business-stealing externality is
A)an externality that is likely to be punished under antitrust laws.
B)the negative externality that occurs when one firm attempts to duplicate exactly the product of a different firm.
C)an externality that is considered to be an explicit cost of business in monopolistically competitive markets.
D)the negative externality associated with entry of new firms in a monopolistically competitive market.

Question

Quizplus · Accepted Answer

A business-stealing externality refers to the negative impact on existing firms in a monopolistically competitive market when new firms enter the market and offer a similar product or service. This can lead to a decrease in market share and profits for existing firms, which is a negative externality. Therefore, option D is the correct choice as it accurately describes this type of externality.

A Business-Stealing Externality Is