Question

A new competitor enters the industry and competes with a second​ firm, which had been a monopolist. The second firm finds that although demand is not perfectly​ elastic, it is now relatively more elastic. The second​ firm's marginal revenue will be​ _____________ and its​ profit-maximizing price will be

Answer 1

Answer: More elastic; Lower

Step-by-step explanation:

Before the entry of a new firm, there is only one firm exist in the market and that single firm is experiencing a monopoly power. But when there is a entry of its competitor then as a result second firm have to reduce their prices of the products as demand is elastic. We know that market is very sensitive to the prices. This fall in prices will lead to increase the demand for the products but with the lower prices, the marginal revenue of the second firm will be more elastic because of the lower prices.