A Business Stealing Externality A Is Likely To Be Punished ~ NewInfo

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. Answer: a. a product-variety externality.The product-variety externality associated with monopolistic competition arises because in monopolistically competitive markets: A. entry and exit are not restricted B. firms produce at excess capacity C. firms try to differentiate their products D. firms produce homogeneous products ANS: C PTS: 1 DIF: Moderate TOP: Monopolistic competition andthe negative externality that occurs when one firm attempts to duplicate exactly the product of a different firm.is the negative externality associated with entry of new firms in a monopolistically competitive market. 15. When the loss from a business-stealing externality exceeds the gain from a product-variety externality, a. firms are more likely to operate at efficient scale. b. there are likely to be too many firms in a monopolistically competitiveproduct variety, it is essential to incorporate this feature of product standards when analyzing the First, raising standards reduces a negative externality associated with consumption as in Costinot (2008) and Staiger and Sykes (2011). Second, governments can use standards to

Suppose a new competitor enters a market and the incumbent

D. product-variety externality occurs. 61. The product-variety externality associated with monopolistic competition arises because in monopolistically competitive markets, A. entry and exit are not restricted. B. firms produce at excess capacity.The product-variety externality is associated with the A. opportunity cost of firms exiting a monopolistically competitive industry. B. loss of consumer surplus from exposure to additional advertising. C. producer surplus that accrues to incumbent firms in a monopolistically competitive industry.The product-variety externality is associated with the a producer surplus that accrues to incumbent firms in a monopolistically competition b.consumer surplus that is generated from the introduction of a new product.• The product-variety externality: - Because consumers get some consumer surplus from the introduction of a new product, entry of a new firm conveys a positive externality on consumers. • The business-stealing externality : - Because other firms lose customers and profits from the entry of a new competitor, entry of a new firm imposes a

Chapter 16 Econ You'll Remember | Quizlet

The "product-variety externality" states that entry of a new firm conveys a negative externality on consumers. True or false? FALSE: Definition of oligopoly: a market structure in which only a few sellers offer similar or identical products. Definition of monopolistic competition:The product-variety externality and the business-stealing externality are both spillover benefits of new firms entering a monopolistically competitive market.The product-variety externality and the business-stealing externality are both spillover benefits of new firms entering a monopolistically competitive market.the product-variety externality associated with monopolistic competition arises because in monopolistically competitive markets, firms try to differentiate their products. because a monopolistically competitive firm has some market power, in the long-run the price of its good exceeds its.The product-variety externality is associated with the A)producer surplus that accrues to incumbent firms in a monopolistically competitive industry. B)loss of consumer surplus from exposure to additional advertising. C)consumer surplus that is generated from the introduction of a new product.

What is an Externality?

An externality is a price or advantage of an financial jobGross Domestic Product (GDP)Gross home product (GDP) is a standard measure of a rustic's economic well being and an indicator of its standard of living. Also, GDP can be utilized to match the productiveness ranges between other nations. experienced via an unrelated 3rd party. The exterior cost or get advantages is not reflected in the final value or good thing about a good or provider. Therefore, economists most often view externalities as a major problem that makes markets inefficient, resulting in market failures. The externalities are the main catalysts that result in the tragedy of the commons.

The number one reason for externalities is poorly outlined assets rights. The ambiguous possession of certain issues might create a scenario when some market agents start to eat or produce more whilst the a part of the price or receive advantages is inherited or gained through an unrelated birthday celebration. Environmental itemsESG (Environmental, Social and Governance)ESG is the acronym for Environmental, Social, and (Corporate) Governance, the 3 huge categories, or spaces, of hobby for what is, including air, water, and natural world, are the maximum common examples of things with poorly outlined property rights.

Types of Externalities

Generally, externalities are categorised as either negative or sure.

1. Negative externality

A negative externality is a unfavorable result of an financial task skilled by way of an unrelated third celebration. The majority of externalities are negative. Some destructive externalities, corresponding to the other types of environmental pollution, are especially damaging due to their important hostile results. Negative externalities are divided into manufacturing and consumption externalities.

Examples of destructive production externalities come with:

Air air pollution: A manufacturing unit burns fossil fuels to produce itemsCost of Goods Manufactured (COGM)Cost of Goods Manufactured (COGM) is a term used in managerial accounting that refers to a time table or commentary that presentations the overall. The people residing in the nearby space and the employees of the factory be afflicted by the deteriorating air high quality.Water air pollution: a tanker spills oil, destroying the wildlife in the sea and affecting the folks residing in coastal areas.Noise air pollution: People dwelling close to a big airport be afflicted by prime noise ranges.

Some examples of unfavorable intake externalities are:

Passive smoking: Smoking results in negative effects now not best on the health of a smoker however on the health of people.Traffic congestion: The more people that use vehicles on roads, the heavier the traffic congestion turns into.2. Positive externality

Positive externality is a benefit from an economic process experienced by an unrelated 3rd party. Despite the benefits of financial activities that contain sure externalities, the externality also creates marketplace inefficiencies. Positive externalities can be prominent as manufacturing and consumption externalities.

Positive production externalities include:

Infrastructure development: Building a subway station in a far flung neighborhood may benefit actual property brokers who transact houses in the area. Real property costs would likely increase due to better accessibility, and the agents would be able to earn upper commissions.R&D activities: A company that discovers a brand new technology because of analysis and construction (R&D) activitiesResearch and Development (R&D)Research and Development (R&D) is a procedure during which a company obtains new knowledge and uses it to give a boost to current products and introduce creates advantages that assist society as an entire.

Examples of certain consumption externalities are:

Individual training: The higher ranges of an individual's education too can raise financial productivity and cut back unemployment levels.Vaccination: Benefits now not most effective the individual vaccinated but people in the group as a result of the probability of being infected decreases.Solutions to Externalities

Due to the opposed impact of both unfavorable and certain externalities on marketplace efficiency, economists and policymakers strive to handle the downside. The "internalization" of the externalities is the means of adopting insurance policies that would prohibit the effect of the externalities on unrelated events. Generally, the internalization is accomplished via govt intervention. Possible solutions include the following:

1. Defining assets rights

A strict definition of belongings rights can prohibit the influence of monetary activities on unrelated parties. However, it is not all the time a viable option since the ownership of specific things such as air or water cannot be unambiguously assigned to a selected agent.

2. Taxes

A government may impose taxes on items or products and services that create externalities. The taxes would discourage actions that impose costs on unrelated parties.

3. Subsidies

A central authority too can supply subsidies to stimulate certain actions. The subsidies are often used to extend the consumption of products with certain externalities.

Additional Resources

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Invisible HandInvisible HandThe idea of the "invisible hand" used to be invented via the Scottish Enlightenment philosopher, Adam Smith. It refers to the invisible marketplace pressureNetwork EffectNetwork EffectThe Network Effect is a phenomenon where provide users of a services or products receive advantages someway when the services or products is adopted by way of further users. This effect is created by many customers when value is added to their use of the product. The greatest and best-known instance of a community effect is the Internet.Normative EconomicsNormative EconomicsNormative economics is a faculty of concept which believes that economics as a subject must pass value statements, judgments, and critiques onPareto EfficiencyPareto EfficiencyPareto Efficiency, a concept frequently utilized in economics, is an economic state of affairs during which it is not possible to make one birthday celebration better off