3. An incumbent firm, Firm 1, faces a potential entrant, Firm 2, that has a lowermarginal cost. The market demand curve is p =120 – 91 - 92. Firm 1 has a constantmarginal cost of $20, while Firm 2's is $10.a) What are the NE quantities, price, and profits if there is no government intervention.b) To block entry, the incumbent appeals to the government to require that the entrantincur extra costs. What happens to the equilibrium if the legal requirement causes themarginal cost of the second firm to rise to that of the first firm, $20?c) Now suppose that the barrier leaves the marginal cost unchanged, but imposes afixed cost. The incumbent keeps its strategy from a). What is the minimal fixed cost that1will prevent entry?

Let there are two firms in the market, firm 1 and firm 2. Firm 1 faces a potential entrant, on the…

Vhat are the NE quantities, price, and profits if there is no government intervention. o block entry, the incumbent appeals to the government to require that the entrant xtra costs. What happens to the equilibrium if the legal requirement causes the al cost of the second firm to rise to that of the first firm, $20? Jow suppose that the barrier leaves the marginal cost unchanged, but imposes a st. The incumbent keeps its strategy from a). What is the minimal fixed cost that 1

Vhat are the NE quantities, price, and profits if there is no government intervention. o block entry, the incumbent appeals to the government to require that the entrant xtra costs. What happens to the equilibrium if the legal requirement causes the al cost of the second firm to rise to that of the first firm, $20? Jow suppose that the barrier leaves the marginal cost unchanged, but imposes a st. The incumbent keeps its strategy from a). What is the minimal fixed cost that 1

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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