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A firm has invested a fixed amount of $100 million in plant and equipment to sell in market A. In market A, it has a monopoly, and by maximizing profits has annual revenues of $40 million and annual total variable costs of $20 million, giving it a 20 percent rate of return. The firm is considering expanding its business to sell in market B. To enter market B, it will need to spend another $100 million in fixed costs, and will then have annual revenues of $15 million and annual variable costs of $10 million. The competitive rate of return is 8 percent. The firm is unregulated and can do whatever it wants. Will the firm enter market B?
Submitted: 1298 days and 11 hours ago.
Category: Homework
Value: $9
Status: CLOSED
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Subject: economics
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Expert:
Rahul Jain
Pos. Feedback:
98.3 %
Accepts:
Answered:
5/4/2006
Tutor
BCOM(H), MBA, ACS
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