Consider a Monopolist Attempting to Engage in Limit Pricing with Total

Multiple Choice

Consider a monopolist attempting to engage in limit pricing with total costs C(Q) = 200 + 10Q.The market (inverse) demand for its product is P = 150 − 2Q.Currently,the monopolist produces 40 units of output.Assuming the potential entrant has the same cost structure as the incumbent monopolist,is it profitable for the entrant to produce 20 units of output?

A) Yes, since the market price of $30 is greater than the average total cost of producing 20 units.
B) No, since the market price of $30 is less than the average total cost of producing 20 units.
C) Yes, since the market price of $70 is greater than the average total cost of producing 20 units.
D) No, since the market price of $70 is less than the average total cost of producing 20 units.