Currently only one producer-the incumbent monopolist

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Reference no: EM13742935

You are considering entry into a market in which there is currently only one producer, the incumbent monopolist. If you enter, the incumbent can take one of two strategies, price low or price high. If they price high, then you expect a $60k profit per year. If they price low, then you expect a $20k loss per year. You should enter if:

a. You believe demand is inelastic

b. You believe the probability that the incumbent will price low is greater than 0.75.

c. You believe the probability that the incumbent will price low is less than 0.75.

d. You believe the market is growing.

Reference no: EM13742935

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