You operate the lone cement factory in the city of Fairbanks, AK. It is extremely costly to transport cement over long distances; so, given the isolation and relatively small population of Fairbanks, you have not historically faced any threat of competition. Much of the overall market demand for cement in the Fairbanks area comes from a large firm in the oil and gas industry and a large property development company. Naturally, you have worked hard over the years to cultivate and maintain a productive working relationship with these two firms that is built upon trust. Cement is typically sold in 94 pound bags, and the inverse demand curve for bags of cement in Fairbanks is given by P = 15 - Q/10,000. As a longtime incumbent, you have no fixed costs of operations, but your marginal cost of producing each bag of cement is $5. a. How many bags of concrete do you produce, what is the market price per bag and your total profits (5 points)? Times are changing, and with recent population growth and plans for significant infrastructure development in the Fairbanks area, you and your business partner are concerned that local investors may work together to establish another cement factory to keep up with regional demand. The production process and costs for cement are widely known, and it is easy to assess demand for cement in the Fairbanks area. b. Your business partner is suggesting that you should significantly lower your prices to deter entry. What strategy is your partner suggesting, and is it likely to be successful in this case? Why or why not (5 points)? For now, assume that the investors do decide to move forward with establishing a rival cement factory. As the incumbent, you have a first-mover advantage and will choose your output first. The new rival firm will take your output as given and choose its output to maximize its profits. Market demand remains the same, and your rival has the same marginal costs as you do. c. What output do you and your rival set, what are your respective profits and the market price (15 points)? d. What output would your rival set if you were to continue to set the monopoly output (5 pts)? e. What is the minimum upfront investment cost for your potential rival that would ensure that his entry is blockaded? Explain your answer (5 pts). f. Aside from strategically setting your output, there are a number of other tactics that you could pursue to try to forestall the entry of your potential rival. Name at least one tactic that you might consider pursuing in this case and explain why it may work. Also discuss any potential legal or antitrust issues associated with engaging in such behavior (10 points).