A Single Firm That Charges the Monopoly Price in the Market

Multiple Choice

A single firm that charges the monopoly price in the market earns $600.If another firm successfully enters the market,the incumbent's profits fall to $350 and the entrant earns $275.If the incumbent engages in limit pricing,its profits are $400.For what interest rate,i,is limit pricing a profitable strategy for the incumbent?

A) i > 4
B) i < 0.25
C) 0.75 < i < 4
D) 0.25 < i < 0.75