Potential Entrant E Threatens to Enter Incumbent I's Market and I

question 20

Multiple Choice

Potential entrant E threatens to enter incumbent I's market and I threatens to lower price to P should E enter.It is crucial for E to believe I's threat that:

• A) P > I's average total cost.
• B) P > I's average variable cost.
• C) P is low enough to discourage E.
• D) I could conceivably charge P without E's threat.
• E) I's profit with P and no entry are better than expected profits with entry.

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