-The Above Figure Shows the Payoff Matrix Facing an Incumbent

question 44

Multiple Choice

-The above figure shows the payoff matrix facing an incumbent firm and a potential entrant.Assuming a fixed cost of entry,the outcome will be that the incumbent

• A) deters entry.
• B) chooses the Stackelberg leader level of output but the potential entrant does not enter anyway.
• C) chooses the Stackelberg leader level of output and the potential entrant enters.
• D) deters entry and earns zero profit.

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Definitions:

Marginal Cost

The increase in total production cost that arises from producing one additional unit of a good or service.

Marginal Benefit

The enhanced happiness or advantage realized by consuming an extra unit of a product or service.

Optimal R&D

The most efficient level of investment in research and development activities that maximizes the potential for innovation and return on investment.

Expected-Rate-Of-Return

The predicted yield or profit from an investment over a specified period, considering the risks involved.