According to the textbook, which of the following statements is (are) correct? (x) As new firms enter a monopolistically competitive market, product diversity in the market increases, however, profits of existing firms decrease since demand for the products of those firms decreases as they lose customers to the new entering firms. (y) The product-variety externality associated with monopolistic competition arises because in markets that are monopolistically competitive markets, firms try to differentiate their products. (z) When the loss from a business-stealing externality exceeds the gain from a product-variety externality, there are likely to be too many firms in a monopolistically competitive market.
According to the textbook, which of the following statements is (are) correct?
(x) As new firms enter a
(y) The product-variety externality associated with monopolistic competition arises because in markets that are monopolistically competitive markets, firms try to differentiate their products.
(z) When the loss from a business-stealing externality exceeds the gain from a product-variety externality, there are likely to be too many firms in a monopolistically competitive market.
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