Suppose a new Dunkin' Donuts shop has opened in town. Its main competitor, Doughnut Delite, will...
Question:
Suppose a new Dunkin' Donuts shop has opened in town. Its main competitor, Doughnut Delite, will likely:
a. Begin to produce more doughnuts,
b. Experience higher marginal costs,
c. Reduce its prices and production,
d. Make no changes in its pricing and production decisions.
Supply and Demand:
One of the main reasons for changes in market equilibrium is increased competition. This is because consumers now have more options and do not look to buy from just a single firm.
Answer and Explanation: 1
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View this answerThe correct answer is c. Reduce its prices and production.
When a new shop opens, Doughnut Delite will find that the demand for its doughnuts falls...
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Causes of Supply and Demand Changes in Microeconomics
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Chapter 2 / Lesson 3
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Causes of supply and demand changes in microeconomics include factors such as market forces and equilibrium price. Explore the definition of market forces and learn about demand force and supply force along a curve.
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