Q1

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: 0 Not enter {N}, ' Enter and charge a high price [E H], i or Enter and chargea low price lEL] A firm incurs some fixed cost for entering the market which is as follows: I The cost of entry is $200 for Firm 1 and 5210 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. Firm 1 _El_ _ E_ 30; 10 20, 20