A Monopolist Earns $50 Million Annually and Will Maintain That

Multiple Choice

A monopolist earns $50 million annually and will maintain that level of profit indefinitely,provided no other firm enters the market.If another firm successfully enters the market,the incumbent's profits remain at $50 million the first period,but fall to $25 million annually thereafter.The opportunity cost of funds is 10 percent,and profits in each period are realized at the beginning of each period.If the monopolist can earn $27 million indefinitely by limit pricing,should it do so?

A) Yes, it will earn $297 million in present value if it does this.
B) Yes, it will earn $270 million in present value if it does this.
C) No, it will earn $297 million in present value if it does this.
D) No, it will earn $270 million in present value if it does this.