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Assuming that if a “SINGLE” firm charges the “MONOPOLY PRICE” in the market, it will earn $500.Therefore, if another firm successfully enters the market, the incumbent’s profits fall to $325 & 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? 0.75 < i < 1.0.II) I > 1.33.III) 5 < I < 10. IV) 1.0 < I < 1.33.I < 0.75.
Assuming that if a “SINGLE” firm charges the “MONOPOLY PRICE” in the market, it will earn $500.Therefore, if another firm successfully enters the market, the incumbent’s profits fall to…
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