Question: The demand function is given as follows: P = 50-Q, and the total cost function of the monopolist firm is, C = 16+ 2Q.

The demand function is given as follows: P = 50-Q, and the

The demand function is given as follows: P = 50-Q, and the total cost function of the monopolist firm is, C = 16+ 2Q. There is a firm that plans to enter to the same market. Assume that the potential firm has the same cost function. a) What is the limit output of the monopolist firm that can deter entry? (Assume that the potential firm believes that the incumbent monopolist will not change its output after entry.) b) Is this a profitable strategy for the incumbent firm?

Step by Step Solution

★★★★★

3.38 Rating (164 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

a To determine the limit output of the monopolist firm that can deter entry we need to find the level of output at which the potential firm would make ... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Economics Questions!

1. How strong are the competitive forces confronting J. Crew in the market for specialty retail? Do a [Michael Porter] five-forces analysis to support your answer. (see chapter 3 in the textfor...

Read the case study "Southwest Airlines," found in Part 2 of your textbook. Review the "Guide to Case Analysis" found on pp. CA1 - CA11 of your textbook. (This guide follows the last case in the...

Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...

In the short run, your firm can vary only the amount of labor it employs. Labor can be hired for $5 per unit, and your firm's fixed costs are $25. Your firm's short-run production function is given...

In a certain large city, hot dog vendors are perfectly competitive, and face a market price of $1.00 per hot dog. Each hot dog vendor has the following total cost schedule: Number of Hot Dogs per Day...

The cost to hire a caterer for a party depends on the number of guests attending. If 100 people attend, the cost per person will be $20. For each person less than 100, the cost will increase by $5....

MachinCo runs a custom machine shop. Four jobs have to be done today. These are five machines, each of which can do at most one job per day. The costs of doing each job on each machine are as...

Golder, Inc., has a functional-based costing system. Golders Miami plant produces 10 different electronic products. The demand for each product is about the same. Although they differ in complexity,...

Evans, Inc., has a unit-based costing system. Evanss Miami plant produces 10 different electronic products. The demand for each product is about the same. Although they differ in complexity, each...

Suppose short-run inverse demand in a monopolistically competitive market is represented by: p(x) = 18 - 0.2x. Cost is given by: TC(x) = 320 + 2x + 0.05x2. a. (liven these demand and cost conditions,...

The following data were obtained for a randomized block design involving five treatments and three blocks: SST = 430, SSTR = 310, SSBL = 85. Set up the ANOVA table and test for any significant...

f constant (k = 20 N/m) is attached to a support at A and to a collar of The unstretched length of the spring is 1 m. Knowing that the collar is rest at point C, when x= 2m determine the magnitude of...

1.When a bank customer deposits $1,000 into her checking and $1,000 into her savings and there is a reserve requirement ratio of 5%, how is this recorded in the bank's balance sheets? Group of answer...

The boom is intended to support two vertical loads F1 and F2. If the cable CB can sustain a maximum load Tmax before it fails, determine the critical loads if F1 = 2F2. Also, what is the magnitude of...

Determine the x, y, z components of reaction at the fixed wall A. The force F2 is parallel to the z axis and the force F1 is parallel to the y axis. Given: a = 2 m d = 2 m b = 1 m F1 = 200 N c = 2.5...

The pipe assembly supports the vertical loads shown. Determine the components of reaction at the ball-and-socket joint A and the tension in the supporting cables BC and BD. Units Used: kN = 103 N...

At a given instant the current through an inductor is 50.0mA and is increased at the rate of 115 mA/s. What is the initial energy stored in the inductor if the inductance is known to be 60.0 mH, and...

An air-filled cylindrical inductor has 2800 turns, and it is 2.5cm in diameter and 28.2 cm long. (a) What is its inductance? (b) How many turns would you need to generate the same inductance if the...

Most financial advisors will tell you that you should never allow one company's stock to represent more than 5 - 1 0 percent of your overall value. True False

Priority Contractors provides maintenance and cleaning services to various corporate clients in New York City. The firm has provided the following forecasts of net income for Year +1 to Year +5: Year...

What are the fundamental determinants of share value, and how do they affect market-based valuation multiples, such as market-to-book and priceearnings ratios?

The weighted average cost-flow assumption is a common technique used to value inventory and determine cost of goods sold. It falls between LIFO and FIFO as to the differential effect on inventory and...

=+a. If the expected weight of each bag is 50 lb and the standard deviation of bag weights is known to be 1 lb, calculate the approximate value of P149.75 # x # 50.252 by relying on the Central Limit...

=+b. What is the probability that the total lifetime of the batteries will exceed 36 hours?

=+d. Refer to your answer to part (c). Suppose the battery manufacturer guarantees that any package of batteries that does not yield a total lifetime