An unplanned decrease in inventories results in A) actual ...

[scienceeasy]

An unplanned decrease in inventories results in
 
  A) actual investment that is greater than planned investment.
  B) an increase in planned investment.
  C) actual investment that is less than planned investment.
  D) a decrease in planned investment.

Question 2

Explain why selling output at a price below that at which marginal revenue equals marginal cost (MR = MC) might serve to deter entry of a potential competitor.
 
  What will be an ideal response?

[pallen55]

Answer to Question 1

C

Answer to Question 2

If a potential entrant is unsure about the existing firm's marginal cost it might believe that the firm is maximizing profits at its chosen price and quantity combination and will conclude that profits are low in this industry. As a result, the potential entrant might believe it cannot compete with the existing firm. Alternatively, the potential entrant might view the low profits as inadequate incentive to enter the industry.