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Yessi15 Yessi15
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5 years ago Edited: 5 years ago, bio_man
Figure 14-6



Refer to Figure 14-6 Use the decision tree to determine whether Pizza Hut should deter Domino's from entering the market for pasta salad. Assume that each firm must earn a 25% return on investment to break even. Explain Pizza Hut's decision process.
Textbook 
Microeconomics

Microeconomics


Edition: 7th
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#1
5 years ago
If Pizza Hut charges $7.49 for its pasta salad, Domino's will enter the market because the rate of return represents an economic profit. If Pizza Hut charges $4.99, Domino's will not enter the market. By charging $4.99, Pizza Hut deters Domino's entry into the market and earns a return on investment of 30%, which is better than the return of 28% it would earn by charging the higher price and having Domino's enter the market.
Yessi15 Author
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#2
5 years ago
Thank you for answering so quickly
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