A Potential Entrant Knows That It Faces a (Inverse) Residual

question 46

Multiple Choice

A potential entrant knows that it faces a (inverse) residual demand curve given by P = 90 - 3Q. While the entrant does not know the inverse market demand, it does know that the incumbent committed to producing 10 units. Using this information, which of the following equations best summarizes the inverse market demand curve?

• A) P = 60 - 3Q
• B) P = 80 - 3Q
• C) P = 50 - 3Q
• D) None of the statements is correct.

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