5. Consider the case of a single product incumbent rm that is currently facing demand gm = 1200 15pm and marginal cost cm = 12 and no xed cost. (a) What price will M set, how many Cb) (C) (d) units does it sell? What is total surplus here? Suppose further that there is a potential single product entrant E that could decide to enter at a cost Ce 2 0. If E enters then M and E choose prices simultane- ously and independently and de- mand is given by {gm = 1200 20pm + lope, (2) qe = 1200 + 10pm 201,3. E's marginal cost is the same as M's. For what values of Ce is it in E's interest to enter? For what values of Ce would total surplus be greater if E entered? (e) What does this question have to do with mergers