What are incumbent’s profits if it commits to output level

Assignment Help Business Economics

Reference no: EM13888492

The U.S. market for hand sanitizer is controlled by a monopoly (firm I, for incumbent) that has a total cost given by TC(qi) = 0.025qi^2. The market demand for hand sanitizer is given by P = 50 – 0.1Q. Under monopoly, Q = Qi. Now let there be a foreign firm (firm E, for entrant) that is considering entry into the market. Because the entrant must ship hand sanitizer all the way across the ocean, its costs are higher. Specifically, the entrant’s costs are given by TC(qe) = 10qe + 0.025qe^2.

Question: Show that the monopolist would need to commit to produce 400 units in order to deter entry of the foreign firm. (Hint: figure out the monopolist’s output level q* such that the entrant loses money if it exports anything other than zero.) What are the incumbent’s profits if it commits to this output level and deters entry?

Reference no: EM13888492

Questions Cloud

Modify the program so that thread acts as a producer : Modify the program so that threadOne( ) acts as a producer by counting up to 5 then threadTwo( ) acts as a consumer and counts down for five iterations. Alternate for 5 productions and 5 consumptions for exactly 3 times.

In the same growing season : In a single year, the Netherlands can raise 100 tons of beef or produce 1,000 boxes of tulips. In the same growing season, Belgium can raise 50 tons of beef or produce 750 boxes of tulips.

The demand for monopolists output : The demand for a monopolist's output is 2,000 / (p+1)2 where p is the price she charges. At a price of 3, the elasticity of demand for the monopolist's output is:

The venom black widows has a rat ld50 of approximately : The venom black widows has a rat LD50 of approximately 0.002 mg/kg. Assuming a density of 1g/ml, what volume of venom do black widows and rattlesnakes have to inject to have 50% chance of killing a human? What are the many assumptions that go into th..

What are incumbent’s profits if it commits to output level : The U.S. market for hand sanitizer is controlled by a monopoly (firm I, for incumbent) that has a total cost given by TC(qi) = 0.025qi^2. The market demand for hand sanitizer is given by P = 50 – 0.1Q. What are the incumbent’s profits if it commits t..

Wheel of retailing and the retail life cycle : 1.According to the wheel of retailing and the retail life cycle, what will happen to factory outlet stores?

Molar specific heat at constant volume of the mixture : Find the molar specific heat at constant volume of the mixture, in terms of the molar specific heats and quantities of the three separate gases.

What is the molecular geometry of a molecule : What is the molecular geometry of a molecule that has three bonding and two non-bonding domains?

Are there any losers with the tui system described : Are there any losers with the TUI system described in this case? If so, who are they? Is this system justified despite creating losers Of the five competitive forces discussed in this case, which do you think TUI system affects?

User Account

All Pages