Suppose Eckerd Pharmacy is the only pharmacy in a particular market, but CVS Pharmacy is thinking about entering the market. Absent entry, Eckerd Pharmacy can maximize profits by producing a small quantity. However, by producing a large quantity, Eckerd Pharmacy can attempt to deter entry by reducing prices and, consequently, profits. E: $45 C: $45 Enter Eckerd Pharmacy must choose how much to produce first and then cVS Pharmacy will choose whether to enter the industry. The strategies and corresponding profits for Eckerd (E) and cVS Pharmacy (C) are depicted in the decision tree to the right. What is the Nash equilibrium of the game? Small Quantity E: $90 C: $0 Stay Out! O A. Eckerd Pharmacy will choose the large quantity and CVS Pharmacy will Enter E: $0 C: - $5 not enter. Large Quantity B. Eckerd Pharmacy will choose the small quantity and CVS Pharmacy will not enter. E: $60 C: $0 OC. Eckerd Pharmacy will choose the large quantity and CVS Pharmacy will Stay Out enter. D. Eckerd Pharmacy will choose the small quantity and CVS Pharmacy will enter. C.

Suppose Eckerd Pharmacy is the only pharmacy in a particular market, but CVS Pharmacy is thinking about entering the market. Absent entry, Eckerd Pharmacy can maximize profits by producing a small quantity. However, by producing a large quantity, Eckerd Pharmacy can attempt to deter entry by reducing prices and, consequently, profits. E: $45 C: $45 Enter Eckerd Pharmacy must choose how much to produce first and then cVS Pharmacy will choose whether to enter the industry. The strategies and corresponding profits for Eckerd (E) and cVS Pharmacy (C) are depicted in the decision tree to the right. What is the Nash equilibrium of the game? Small Quantity E: $90 C: $0 Stay Out! O A. Eckerd Pharmacy will choose the large quantity and CVS Pharmacy will Enter E: $0 C: - $5 not enter. Large Quantity B. Eckerd Pharmacy will choose the small quantity and CVS Pharmacy will not enter. E: $60 C: $0 OC. Eckerd Pharmacy will choose the large quantity and CVS Pharmacy will Stay Out enter. D. Eckerd Pharmacy will choose the small quantity and CVS Pharmacy will enter. C.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter10: Monopolistic Competition And Oligopoly

Section: Chapter Questions

Problem 19P: Andreas Day Spa began to offer a relaxing aromatherapy treatment. The film asks you how much to...

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Andrea’s Day Spa began to offer a relaxingaromatherapy treatment. The firm asks you how muchto charge to maximize profits. The first two columnsin Table 10.5 provide the price and quantity for thedemand curve for treatments. The third column showsits total costs. For each level of output, calculate totalrevenue, marginal revenue, average cost, and marginalcost. What is the profit-maximizing level of output forthe treatments and how much will the firm earn inprofits?
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Andreas Day Spa began to offer a relaxing aromatherapy treatment. The film asks you how much to charge to maximize profits. The first two columns in Table 10.5 provide the price and quantity for the demand curve for treatments. The third column shows its total costs. For each level of output, calculate total revenue, marginal revenue, average cost, and marginal cost. What is the profit-maximizing level of output for the treatments and how much will the firm earn in profits?
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Andrea's Day Spa began to offer a relaxing aromatherapy treatment. The firm asks you how much to charge to maximize profits. The demand curve for the treatments is given by the first two columns in the following table; its total costs are given in the third column. Answer the following question accordingly. Price QuantityTC $25.00 $100 $24.00 10 $250 $23.00 20 $420 $22.00 30 $600 $21.00 40 $780 $20.00 50 $970 $19.00 60 $1,170 The profit maximizing price in the above table is: Select one: a. $21 b. $24 c. $22 d. $25 оооо