When firms enter a monopolistically competitive market and the business-stealing externality is larger than the product-variety externality then ?

A. The only way to improve efficiency in this market is for the government to regulate it like a natural monopoly.

B. There are too few firms in the market and market efficiency could be be increased with additional entry

C. the number of firms in the market is optimal and the market is efficient

D. there are too many firms in the market and market efficiency could be increased if firms exited the market

Found an error? Read our corrections policy and submit a sourced correction below. You can also share a useful explanation in your own words.

Discuss the answer or suggest a sourced correction
Thank you for contributing.
Your comment was submitted and will appear after editorial review.

Your email is used only for moderation and is never displayed. Spam, copied material and fabricated endorsements are rejected.