Preventing entry of firms by monopoly

Reference no: EM1368157

Please help me solve this problem...long-run effects

Your firm sells a very popular children's game. As the manager, you have received information that another firm is thinking about introducing a similar game. You have the following facts:

Your average cost of production is constant at $20.
At the current monopoly price of $50, you sell 120 games per month.
You could prevent the entry of the second firm by increasing your output to 150 games per month and cutting the price to $40.
If the second firm enters the market, your price would decrease to $30 and you would sell only 80 games per month.

Should you prevent the entry of the second firm? Facts and figures.

Reference no: EM1368157

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