In 2010 and 2011, the government gave incentives to new businesses. A new firm c

Question

In 2010 and 2011, the government gave incentives to new businesses. A new firm could write off $10,000 in startup costs, they could write off new capital investment, investors who invested in startups and small businesses would be exempt from capital gains tax if they sold their stakes for a profit, and the Small Business Administration increased the size of loans it would guarantee to $5 million. What effect would these incentives have on monopolistically competitive markets? Explain. At the new long-run equilibrium, these incentives would likely have O A. decreased competition O B. increased the number of firms O C. increased firm profits. 0 D. decreased the total market quantity E. increased market prices

Explanation / Answer

The correct option is b, As this will result in increased competition thus number of firms will increase

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