A single firm that charges the monopoly price in the market earns $1,300. If another firm successfully enters the market, the incumbent's profits fall to $700 and the entrant earns $575. If the interest rate is 0.5, how high must the firm's profits from limit pricing be for limit pricing to be a profitable strategy for the incumbent?
A. ?L > $500
B. ?L > $200
C. ?L > $900
D. ?L > $1,000
Answer: C
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