2) Given the success of his Dallas establishment, Dr. Diamond is considering whether to expand...
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2) Given the success of his Dallas establishment, Dr. Diamond is considering whether to expand his operations and open a second Diamond Steak Palace on the Las Vegas Strip. Naturally, Salt Bae, who pioneered the concept of selling over-the-top steaks to big-spenders already has a branch of his famous Nusr-et Steakhouse on the Strip. Dr. Diamond and Mr. Bae have engaged in extensive market research and have determined that the inverse demand curve for over-the-top steaks in Las Vegas is given by P = 1,900 .05Q. Both restaurants have a marginal cost of $100 per steak and would compete on quantity. Naturally, if he were to choose to enter the Vegas market, Dr. Diamond would spare on expense in designing his new steakhouse, and would incur a fixed cost of entry of $4,000,000.
d. What is the minimum output Qd that Salt Bae would need to set to make it unprofitable for Dr. Diamond to enter the market? We refer to the output level Qd as the entry deterrent output (5 points).
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