question archive The market for gumdrops is currently served by Gumby’s, a monopoly
The market for gumdrops is currently served by Gumby’s, a monopoly
Subject:EconomicsPrice: Bought3
The market for gumdrops is currently served by Gumby’s, a monopoly. Marketdemand for gumdrops is given by p = 48?Q, where Q is market output of gumdrops. LicoriceLicks, Inc. is considering entering the gumdrop market. Entry entails a one-time cost of $70;there are no other costs for either firm. Gumby’s can set their output prior to Licorice Licks’entry decision.(a) If Gumby selected an output level of 24, what output would Licorice Lick’s choose?Explain. What would be Gumby’s profit? What would be Lick’s profit?(b) If Gumby selected an output level of 32, what output would Licorice Lick’s choose?Explain. What would be Gumby’s profit? What would be Lick’s profit?(c) If Gumby selected an output level of 42, what output would Licorice Lick’s choose?Explain. What would be Gumby’s profit? What would be Lick’s profit?(d) Based on the above analysis, if Gumby could only select an output of 24, 32 or 42, whatoutput would it select? Explain.
