Gce Model Questions Vol1 2019 Economics Question 5
Practice objective / multiple choice question 5 from the 2019 Gce Model Questions Vol1 Economics examination.
A market is currently a monopoly. Demand is given by \( P = 300 - Q \). The incumbent's total cost is \( TC = 200 + 20Q \) (fixed cost 200, marginal cost constant at 20). A potential entrant would have to pay an entry cost of \(\$500\) before it can compete.\n(a) Calculate the monopoly's profit.\n(b) Will the entrant enter the market?\n(c) What is the highest price the incumbent could charge while still deterring entry (i.e., making the incumbent's profit equal to the entry cost)? Give the price to two decimal places.
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About This Question
This is Gce Model Questions Vol1 2019 Economics Question 5. It is one of the objective questions from the 2019 Gce Model Questions Vol1 Economics examination.
Difficulty level: Medium .
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