SunCenter Is the Only Firm in Its Industry

Essay

SunCenter is the only firm in its industry.Currently,SunCenter charges $75 per unit,a price well in excess of its marginal cost of $5 per unit,and earns $70 million per year in profit.According to a trusted source,the manager of SunCenter learned that a new firm is contemplating entering the market.This would reduce its profit to $40 million per year.If SunCenter expanded its output and lowered its price to $50,the entrant would find it unprofitable to enter the market,and SunCenter would earn profits of $50 million per year for the indefinite future.
a.What pricing strategy is the manager of SunCenter considering?
b.If SunCenter was able to credibly commit to maintain a price of $50,would it be a profitable strategy?