When new firms enter a perfectly competitive market,a. demand increases.b. the short-run market supply curve shifts right.c. the short-run market supply curve shifts left.d. existing firms will increase prices to keep the new firms from entering.Show Transcribed Text3Scenario 16-7Consider the problem facing two firms, Yum Yum and Bertollini, in the frozen food market. Each firm has just come up with an idea for a new "frozen meal for two"which it would sell for $9. Assume that the marginal cost for each new product is a constant S2, and the only fixed cost is for advertising. Each company knows that if itspends $12 million on advertising it will get 1.5 million consumers to try its new product. Yum Yum has done market research which suggests that its product does nothave any "staying" power in the market. Even though it could get 1.5 million consumers to buy the product once, it is unlikely that they will continue to buy the productin the future. Bertollini's market research suggests that its product is very good, and consumers who try the product will continue to be consumers over the ensuing year.On the basis of its market research, Bertollini estimates that its initial 1.5 million customers will buy one unit of the product each month in the coming year, for a total of18 million units.Refer to Scenario 16-7. On the basis of a theory that people buy a product because it is advertised, the content of advertisements for Bertollini's productOa. must show a consumer taste-test to be successful.O b. must include celebrity endorsements to be successful.Oc. is irrelevant to the success of the advertisement.Od. Both a and b would be equally successful.

Perfectly competitive market refers to a market at which there are many sellers and buyers dealing…

When new firms enter a perfectly competitive market, a. demand increases. b. the short-run market supply curve shifts right. c. the short-run market supply curve shifts left. d. existing firms will increase prices to keep the new firms from entering.

When new firms enter a perfectly competitive market, a. demand increases. b. the short-run market supply curve shifts right. c. the short-run market supply curve shifts left. d. existing firms will increase prices to keep the new firms from entering.

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter13: Firms In Competitive Markets

Section: Chapter Questions

Problem 5PA

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