La Tortilla Is the Only Producer of Tortillas in Santa

question 12

Multiple Choice

La Tortilla is the only producer of tortillas in Santa Teresa. The firm produces 10,000 tortillas each day and has the capacity to increase production to 100,000 tortillas each day. La Tortilla has made a large profit for years, but no other firm has chosen to compete in the Santa Teresa tortilla market. La Tortilla has been able to deter entry because if other firms were to enter the market it would greatly step-up production and reduce price.

• A) La Tortilla's behavior is inconsistent with economic theory.
• B) La Tortilla has been successful because of its credible threat.
• C) La Tortilla behaves like a Stackelberg firm.
• D) La Tortilla must have other barriers to entry to protect its monopoly power.

---

Definitions:

Lorenz Curve

A graphical representation used to show the distribution of income or wealth within an economy, illustrating the degree of inequality.

Constructed

Developed or formed through a deliberate process of bringing components or elements together.

Social Insurance Programs

Government-run programs designed to provide financial protection to citizens against economic risks (e.g., unemployment, disability, or retirement).

Main Programs

Often refers to the most important or widely recognized policies, plans, or software applications within a specific context or organization.