Since barriers to entry are important sources of monopoly power and profits, an incumbent firm may

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    convince any potential competitor that entry is unprofitable by increasing productive capacity and lowering price.
     reduce output and increase price to maximize profits prior to competition entering the market.
     develop a reputation for irrationality so that its threats of expanding output and wage a price war are credible.
     Both 1 and 3.
asked Jun 2, 2013 in Economics by anonymous
    

1 Answer

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Both 1 and 3.
answered Jun 3, 2013 by Xyz ~Expert~ (3,650 points)

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