1. To deter entry, a monopolist can simply threaten that if a second firm enters, the monopolist will cut its price to the average cost
. (True/False)
2. Arrows up or down: As the minimum entry quantity decreases, the entry-deterring quantity
, the limit price
, and the profit from the entrydeterrence strategy
.
3. In Figure 27.9 on page 615, rectangle 2 is not a Nash equilibrium because if
picks a small quantity, the best response for
is to
.
4.A contestable market has relatively (high, low)
costs.
5.Microsoft is a(n)
(secure/insecure) monopolist, and the limit price is roughly
(10, 20, 40, 60, 90, 100) percent of the pure monopoly price. (Related to Application 4 on page 617.)