{"id":211884,"date":"2025-05-05T09:15:21","date_gmt":"2025-05-05T09:15:21","guid":{"rendered":"https:\/\/learnexams.com\/blog\/?p=211884"},"modified":"2025-05-05T09:15:23","modified_gmt":"2025-05-05T09:15:23","slug":"a-business-stealing-externality","status":"publish","type":"post","link":"https:\/\/www.learnexams.com\/blog\/2025\/05\/05\/a-business-stealing-externality\/","title":{"rendered":"A business-stealing externality"},"content":{"rendered":"\n

A business-stealing externality
a. is
likely to be punished under antitrust laws.
b. occurs
when one firm attempts to duplicate exactly the product of a different firm.
c. is
considered to be an explicit cost of business in monopolistically competitive
markets.
d. is
the negative externality associated with entry of new firms in a
monopolistically competitive market.<\/p>\n\n\n\n

The correct answer and explanation is :<\/strong><\/mark><\/p>\n\n\n\n

The correct answer is b. occurs when one firm attempts to duplicate exactly the product of a different firm<\/strong>.<\/p>\n\n\n\n

Explanation:<\/h3>\n\n\n\n

A business-stealing externality refers to the negative impact that one firm\u2019s actions can have on another firm, typically within a competitive market. This externality arises when a firm tries to replicate or copy exactly the product or services of an existing business, thereby attracting customers away from the original business.<\/p>\n\n\n\n

Key Points:<\/h4>\n\n\n\n
    \n
  1. Duplication of Products<\/strong>: In monopolistically competitive markets, firms differentiate their products to gain a competitive edge. A business-stealing externality occurs when a firm enters the market with a product so similar to an existing product that it directly steals customers, thus lowering the profits of the original firm. For example, if Firm A creates a unique type of gadget, and Firm B enters the market with an identical gadget, Firm B is essentially creating a business-stealing externality by drawing customers away from Firm A.<\/li>\n\n\n\n
  2. Market Competition and Entry<\/strong>: In a monopolistically competitive market, there is free entry and exit of firms. When new firms enter and offer products that closely resemble those of existing firms, they can capture part of the market share, reducing the revenue of the incumbent firms. This creates a situation where existing firms feel the negative effects of the new firm\u2019s competition, which is the “externality.”<\/li>\n\n\n\n
  3. Not a Cost but a Side Effect<\/strong>: While this externality is negative, it\u2019s not considered an explicit cost of doing business, as it is an indirect effect of market entry. It arises due to the entry of new competitors and their efforts to capture market share from existing firms.<\/li>\n\n\n\n
  4. Impact on Firms<\/strong>: While firms in monopolistically competitive markets may experience losses or reduced profits due to this externality, it’s a natural outcome of a competitive market, where the focus is on innovation and differentiation. However, it doesn’t typically result in antitrust law violations, as long as firms are not engaging in anti-competitive practices (such as price fixing or collusion).<\/li>\n<\/ol>\n\n\n\n

    In summary, the business-stealing externality occurs when a firm copies another’s product and, through competition, reduces the profits of the original producer.<\/p>\n","protected":false},"excerpt":{"rendered":"

    A business-stealing externalitya. islikely to be punished under antitrust laws.b. occurswhen one firm attempts to duplicate exactly the product of a different firm.c. isconsidered to be an explicit cost of business in monopolistically competitivemarkets.d. isthe negative externality associated with entry of new firms in amonopolistically competitive market. The correct answer and explanation is : The […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-211884","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/211884","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=211884"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/211884\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=211884"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=211884"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=211884"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}