While Smoking Is on the Decline in the United States

Multiple Choice

While smoking is on the decline in the United States, China is still puffing away madly. That's not because the government is eager to protect its citizens from the hazards of smoking. It's because China is eager to protect its own tobacco industry which is a state monopoly. How would entry of foreign companies into the tobacco market affect the economic profit of the state monopoly?

A) Its economic profits would decrease because of increased competition.
B) Its economic profits would increase because of increased competition.
C) Its economic profits would decrease because of rent seeking activity.
D) Its economic profits would increase because of rent seeking activity.