Why do competitive firms enter the market in spite of the price war threatened by the dominant firm?


The new firms are usually forward looking. They are aware of the fact that if they actually open up for business the dominant firm's best strategy would be to accommodate them rather than sacrifice profits in hopes of bankrupting them.

Economics

You might also like to view...

For a restaurant, all the following are fixed costs, except

a. Space rental b. Advertising c. Raw material cost d. All of the above-they are all variable costs

Economics

Exports are goods and services that are produced:

A. in other countries and consumed domestically. B. domestically and consumed in other countries. C. and consumed in other countries. D. and consumers domestically.

Economics

The marginal propensity to consume (MPC) is the slope of the:

a. GDP curve. b. disposable income curve. c. consumption function. d. autonomous consumption curve.

Economics

An insurance company finds that it insured an adverse selection of largely ill patients. It is forced to increase insurance premiums to reduce losses. How does this aggravate the adverse selection problem?

Economics