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:

Long-Term Investment

Investments a company intends to hold for more than one year, typically including stocks, bonds, or real estate.

Investment Income

Investment income refers to the revenue generated from holding financial assets, including dividends, interest, and capital gains.

Long-Term Investment

Investments in assets or securities that a company intends to hold for a period longer than one year.

Common Stock

Equity ownership in a corporation, often with voting rights, representing a claim on a portion of the company's profits.