Question

​Sammie's Shiny Shoes is a firm that operates in a competitive market. The number of firms in the​ shoe-shining market increases. In the short​ run, Sammie will​ _______.

A. cut back on the number of shoes he shines

B. increase the number of shoes he shines to maintain market share

C. wait and see what happens to the market price

D. not be affected by the number of competitors

Answer 1

Answer:

A. cut back on the number of shoes he shines

Explanation:

Assuming a competitive market, in the short run, an increase in the number of firms means an increase in competitiveness and, consequently, an increase in the service supply while demand stays the same. This change causes Sammie to experience a decrease in his market share and, therefore, he will cut back on the number of shoes he shines.