Deterrence quantity equals zero profit quantity less minimum entry quantity.

Question

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Deterrence quantity refers to the level of production that a firm must maintain in order to deter entry by potential competitors. It is calculated as the difference between the quantity that maximizes profits (i.e. the profit-maximizing quantity) and the minimum quantity that must be produced in order to avoid driving the price down to the point where entry becomes attractive for competitors. Therefore, deterrence quantity equals zero profit quantity less minimum entry quantity.

Deterrence Quantity Equals Zero Profit Quantity Less Minimum Entry Quantity