A New Firm Enters a Market Which Is Initially Serviced

question 110

Multiple Choice

A new firm enters a market which is initially serviced by a Bertrand duopoly charging a price of $20.What will the new price be should the three firms coexist after the entry?

• A) $25
• B) $20
• C) $15
• D) None of the preceding answers is correct.

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Definitions:

Appreciates

When the value of an asset or currency increases in value in comparison to another currency or benchmark.

Non-Free Trade

Trade practices where governments impose tariffs, quotas, or regulations to restrict the free flow of goods and services between countries.

Agricultural Subsidies

Government payments to farmers to supplement their income, manage the supply of agricultural commodities, and influence the cost and supply of such goods.

Tariff

A tax imposed on imported goods, intended to increase the price of foreign products to protect domestic producers.