Profit and output choice of incumbent firm

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Suppose that another firm can enter this market by importing toys. Because of trade barriers the new firm's costs are somewhat high and its total cost function can be expressed as the following: CE(QE) = 20QE + 0.05QE. Now if the incumbent firms is committed to the monopoly output, what id is the effective demand curve faced by the new firm? How much does it choose to sell when it enters the market? What is the resultant market price? How much does each of the two firms earn in profits?

Reference no: EM1316991

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