Potential entrant E threatens to enter incumbent I's market and I threatens to lower price to P should E enter.It is crucial for E to believe I's threat that:
A) P I's average total cost.
B) P I's average variable cost.
C) P is low enough to discourage E.
D) I could conceivably charge P without E's threat.
E) I's profit with P and no entry are better than expected profits with entry.

Question

Potential entrant E threatens to enter incumbent I's market and I threatens to lower price to P should E enter.It is crucial for E to believe I's threat that:
A) P > I's average total cost.
B) P > I's average variable cost.
C) P is low enough to discourage E.
D) I could conceivably charge P without E's threat.
E) I's profit with P and no entry are better than expected profits with entry.

Quizplus · Accepted Answer

The Answer of Potential entrant E threatens to enter incumbent I's market and I threatens to lower price to P should E enter.It is crucial for E to believe I's threat that:
A) P > I's average total cost.
B) P > I's average variable cost.
C) P is low enough to discourage E.
D) I could conceivably charge P without E's threat.
E) I's profit with P and no entry are better than expected profits with entry.

Potential Entrant E Threatens to Enter Incumbent I's Market and I