If an Incumbent Cannot Commit and Faces an Identical Potential

question 8

Multiple Choice

If an incumbent cannot commit and faces an identical potential entrant with relatively high fixed costs that are below the level where entry is blockaded,the incumbent will

• A) produce the Cournot duopolist level of output.
• B) produce the Stackelberg leader level of output.
• C) set price equal to marginal cost.
• D) produce a level of output that is greater than the Stackelberg leader level of output.

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Definitions:

Cost of Land

The purchase price and all associated costs, such as legal fees and surveying, of acquiring land for business use.

Asset's Cost

The total amount of money or the value exchanged to acquire, maintain, improve, or replace an asset.

Intended Use

The purpose for which a product or service is specifically designed or for which it is intended to be used.

Average Total Assets

Average total assets are calculated by taking the sum of total assets at the beginning and end of an accounting period, then dividing by two, used for analyzing a company's asset efficiency.