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7. The Gizmo Company has a monopoly on the production of gizmos. Market demand is described as follows: at a price of $1,000 per gizmo,

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7. The Gizmo Company has a monopoly on the production of gizmos. Market demand is described as follows: at a price of $1,000 per gizmo, 25,000 units will be sold whereas at a price of $600, 30,000 will be sold. The only costs of production are the initial sunk costs of building a plant. Gizmo Co. has already invested in capacity to produce up to 25,000 units. 1. Suppose an entrant to this industry could capture 50 percent of the market if it invested in $10 million to construct a plant. Would the firm enter? Why or why not? 2. Suppose Gizmo could invest $5 million to expand its capacity to produce 40,000 gizmos. Would this strategy be a profitable way to deter entry

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