Question
Could someone please help me with this question I am struggling to understand this concept, thank you. Q3) Two firms, Firm 1 and Firm 2
Could someone please help me with this question I am struggling to understand this concept, thank you.
Q3)
Two firms, Firm 1 and Firm 2 are considering whether to enter a market and if so, whether to charge a high price ($15) or a low price ($5).
Hence each firm needs to choose from the following three strategies:
Not enter (N), Enter and charge a high price (E - H), or Enter and charge a low price (E - L)
A firm incurs some fixed cost for entering the market which is as follows:
The cost of entry is $200 for Firm 1 and $210 for Firm 2.
In addition to the above fixed cost, the average variable cost per unit of output sold is $3.
The quantity of output each firm is able to sell is as per the following table.
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