You Are Considering Entry into a Market in Which There

Multiple Choice

You are considering entry into a market in which there is currently only one producer (incumbent) .Entry will require $20k in fixed costs per year (avoidable at the end of each year) .If you enter,the incumbent can take one of two strategies,price low or price high.If they price high then you expect a $60k profit per year.If they price low then you expect a $20k loss per year.

A) You should enter if demand is inelastic
B) If you believe the probability that the incumbent will price low is greater than 0.75 then you should enter
C) If you believe the probability that the incumbent will price low is less than 0.75 then you should enter
D) The entry decision depends on the size of the market