Using the same data as in Spreadsheet Exercise 8.1, assume that City Cement is an incumbent monopoly and Mountain Cement is a potential entrant. City chooses an output level and then Mountain decides whether or not to enter the industry. Mountain can avoid paying fixed costs if it decides not to enter. Create a modified version of the spreadsheet used for Exercise 8.1 to determine what output City should produce now to maximize profit. Is entry blockaded, deterred, or accommodated?

Exercise 8.1

Outreach Explorations and Summit Adventures are the only two vacation adventure companies operating in a national park. The adventure experiences they offer are very similar and they compete using their prices. Each firm can choose a high price ­(collude) or a low aggressive price (defect). The following profit matrix shows the one-period profits arising from these actions. 

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Summit Collude Defect 9. 6. Collude Outreach 3 Defect 3