Question

Question 1:

Question 2:

In a contestable market with one firm, the existing firm A. sets its price above the monopoly price. B. sets its price equal to the monopoly price. c. has no competition. D. sets its price lower than the monopoly price. O E. sets its price so that other firms will enter the market.

Answer 1

Timely strategies (red squares) High Price Low Price Comfort Enter ( 10.5, 7.5) (1.50) strategies wich Don't 15-0,0) (7.5.0 Enter out to iť make Sequential game of it. take e T to show Timeby strategy a c) to show comfort Business line, H show si a higher price , ! L' to show lower E to Ahow Enter Det to show Don't Enter Strategy. So, Sequential Game look price, Strategy like this. # 다. C DE E DE E (10-5,7-5)||(15,0) (1.590) (7.5,0)

Sequential Game whatever According to Comfort choose by businessline strategy Timely business line always choose charging Higher price price strategy. It is timely non- Credible threat that giving the Comfort business so Comfort will enter in market. line the () comfort because believe Timery's threat Answer. D] dounit : Timely will charge higher price regardless of decision comfort's (2) Comfort to the market because Answer c] enters: wide receive profit of $7.5 milion rather than Zero.