Asked by Tomas Calderaro on Jul 15, 2024
Verified
The business-stealing externality states that entry of a new firms imposes a cost on existing firms because they lose customers.
Business-Stealing Externality
Negative impacts on existing firms due to entry of new competitors, which can steal customers and reduce profits.
New Firms
Companies that have recently entered the market, bringing innovation, competition, and potentially disrupting established market dynamics.
Existing Firms
Companies or businesses that are currently operational and active within a market or industry.
- Comprehend the principles of product diversity and the external effects of business encroachment within the context of monopolistic competition.
Verified Answer
OL
Oziel LeyvaJul 21, 2024
Final Answer :
True
Explanation :
The business-stealing externality refers to the negative impact on existing firms when new firms enter the market, capturing some of their customers and thus reducing their sales and profits.
Learning Objectives
- Comprehend the principles of product diversity and the external effects of business encroachment within the context of monopolistic competition.