The More a Firm Invests in a New Production Technology,the

question 11

Multiple Choice

The more a firm invests in a new production technology,the lower its marginal costs.Which of the following scenarios involving this incumbent firm and a potential entrant makes the least economic sense?

• A)The incumbent overinvests to deter entry when this investment is observable to the entrant.
• B)The incumbent overinvests to deter entry when this investment is unobservable to the entrant.
• C)The incumbent underinvests to accommodate entry when this investment is observable and they compete in prices.
• D)The incumbent overinvests to accommodate entry when this investment is observable and they compete in quantities.

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Definitions:

Allergic Reactions

Immune system responses to a foreign substance that is not typically harmful to the body, like pollen or pet dander.

Anis/o

A prefix meaning unequal or dissimilar.

Eosin/o

A prefix relating to eosinophils, a type of disease-fighting white blood cell, often associated with allergic reactions and infections.

Erythr/o

A prefix used in medical terms to denote a relation to red or red blood cells.