Figure 8.10
-In Figure 8.10, airline Fly Smart is initially a secure monopoly between two cities X and Y at point M, serving 300 passengers per day at the profit maximizing price of $300 per ticket. Suppose that Fly Smart discovers that a second airline is contemplating entering the market. If the minimum market entry quantity is 130 passengers per day, Fly Smart's entry-deterring quantity is

Question

Quizplus · Accepted Answer

The entry-deterring quantity is the quantity that Fly Smart would need to serve to make it unprofitable for the second airline to enter the market. By serving 370 passengers, Fly Smart captures enough of the market to leave less than 130 passengers for the new entrant, deterring entry.

Figure 8.10 -In Figure 8.10, Airline Fly Smart Is Initially a Secure