Initially suppose a is an incumbent monopolist ie b is

Question

Suppose an incumbent firm (A) holds a cost advantage over a potential entrant (B). That is, A and B's total costs are given by:

A: TC_A = 100Q_A, where Q_A is the quantity A produces

B: TC_B = 200Q_B, where Q_B is the quantity B produces

Suppose the market demand is Q = 1200 - 2P, where Q is the market quantity and P is the market price.

Initially, suppose A is an incumbent monopolist (i.e., B is currently not in the market), what is the monopoly price, quantity, and profit?  Invoking the Sylos Postulate, how much would B want to produce (i.e., B enters the market) if A stuck to the monopoly quantity? What would be A's profit if B entered the market? Now, what would be the limit price A could set to keep B out of the market? What is A's profit at this limit price?  Is this a case of blockaded entry, effectively impeded entry, ineffectively impeded entry, or free entry? Explain.