A Single Firm That Charges the Monopoly Price in the Market

question 11

Multiple Choice

A single firm that charges the monopoly price in the market earns $500.If another firm successfully enters the market,the incumbent's profits fall to $325 and the entrant earns $250.If the incumbent engages in limit pricing,its profits are $400.For what interest rate,i,is limit pricing a profitable strategy for the incumbent?

• A) i < 0.75
• B) 0.75 < i < 1.0
• C) 1.0 < i < 1.33
• D) i > 1.33

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Definitions:

Tabular Presentation

A method of presenting information or data in rows and columns, making it easier to understand and analyze.

Inversely Related

A situation where an increase in one variable leads to a decrease in another variable, demonstrating a reverse association between the two.

Positive Relationship

A connection between two variables where an increase in one variable results in an increase in another.

Independent Variable

In experimentation or statistical analysis, the variable that is manipulated or changed to observe its effects on the dependent variable.