Left and Right Enterprises are in a duopoly, earning each annual profits of £10 million per year. Right Enterprises coul

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answerhappygod
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Left and Right Enterprises are in a duopoly, earning each annual profits of £10 million per year. Right Enterprises coul

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Left and Right Enterprises are in a duopoly, earning each annual
profits of £10 million per year. Right Enterprises could earn £20
million per year as a monopolist. Right Enterprises drops its price
to £60 when its marginal cost is £70 and holds it there for a year
to be able to drive Left Enterprises out of the market.
(a) What pricing strategy is the manager of Right Enterprises
considering? Explain this strategy and how it helps to reduce
competition in a market
(b) The year that drops its price, Right Enterprises will lose
£10 million. At what level of interest rate i the strategy of Right
Enterprises will be profitable?
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