You Are a Potential Entrant into a Market That Previously

question 39

Essay

You are a potential entrant into a market that previously has had entry blocked by the government. Your market research has estimated that the inverse market demand curve for this industry is P = 22,500 - 75Q, where . You estimate that if you enter the market, your own cost function will be C_y(Q_y) = 15,300Q_y. The government has invited your firm to enter the industry, but it will require you to pay a one-time license fee of $100,000. You do not know the cost functions of the firms currently in the market; however, the price is now $16,000. Last year 87 units were sold by existing firms. Would you choose to enter this market? Explain.

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Definitions:

Anglo-American Colonies

Refers to colonies in North America that were under British rule, which later formed the United States of America.

English Civil War

A series of armed conflicts and political machinations between Parliamentarians ("Roundheads") and Royalists ("Cavaliers") in England in the mid-17th century, leading to the trial and execution of Charles I, the dictatorship of Oliver Cromwell, and eventually the restoration of the monarchy.

Magna Carta

A charter of liberties agreed to by King John of England in 1215, considered a foundational document establishing principles of legal authority and individual rights.

Liberties

The state in which one lives without facing harsh restrictions from those in authority on their personal behaviors, lifestyle, or political leanings.