A single firm that charges the monopoly price in the market earns $600. If another firm successfully enters the market, the incumbent's profits fall to $350 and the entrant earns $275. If the incumbent engages in limit pricing, its profits are $400. For what interest rate, i, is limit pricing a profitable strategy for the incumbent?
A. 0.25 < i < 0.75
B. i > 4
C. i < 0.25
D. 0.75 < i < 4
Answer: C
You might also like to view...
Suppose there is a bank panic. Which of the following would not be a consequence of this bank panic?
A) Individual banks would have to shrink the value of loans they made. B) The economy would likely enter into a recession. C) Bank total reserves would decrease. D) Bank checking account balances would decrease. E) Required reserves would increase.
When a strategy is the best one to follow no matter what strategy other players choose, it is called a:
A. golden decision. B. dominated strategy. C. dominant strategy. D. zero-sum strategy.
Which of the following statements about economic growth is true?
What will be an ideal response?
an increase in marginal tax rates will
What will be an ideal response?