What is the maximum level of fixed costs

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The demand for cargo bikes in New Zealand is where I is average income in thousands (i.e. if average income is 50,000 I=50) a) Suppose Avanti decides to begin producing cargo bikes, and there are currently no other companies supplying the New Zealand market. If their marginal cost is expected to be $500, what is the maximum level of fixed costs at which they would be willing to enter the market? [Assume average income is $40,000] b) Now suppose fixed costs are 500,000, and if a second firm enters they will compete with Avanti through Cournot competition. Find the Cournot equilibrium and determine whether a second firm will choose to enter. c) Explain using a graph how an increase in average income (market size) might encourage more firms to enter the market.

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What is the maximum level of fixed costs : The demand for cargo bikes in New Zealand is where I is average income in thousands (i.e. if average income is 50,000 I=50) a) Suppose Avanti decides to begin producing cargo bikes, and there are currently no other companies supplying the New Zealand..

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