When firms enter a monopolistically competitive market and the business-stealing externality outweighs the product-variety externality, what follows?

1. A Option A: There are too few firms in the market and market efficiency could be increased with additional entry
2. B Option B: There are too many firms in the market and market efficiency could be increased if firms exited the market
3. C Option C: The number of firms in the market is optimal and the market is efficient
4. D Option D: The only way to improve efficiency in this market is for the government to regulate it like a natural monopoly

Answer checked 11 October 2026 · How we write and check questions