Problem
An industrial park in Farson, Wyoming needs to decide how to handle shipping of materials to and from its businesses. The park forms a governing board made of the executives from each business on site, and the board must choose between two shipping options. Option 1 is to allow shipments to be handled by separate single-van courier firms, of which there are 20 in the area and each has an average total cost of $36. Option 2 is to use a single large truck, which has a total cost function given as TC = 10,625 + 15Q. Either option perfectly satisfies the needs of the industrial park on its own (assume no difference in convenience, scheduling, etc). The park's demand for shipping services is given as P = 100 - 0.1Q.
i) Assume the large truck wants to secure its monopoly status. Will it be able to prevent the smaller courier firms from entering the market? Prove your answer analytically.
ii) If you answer "yes" in i, and the large truck is able to maintain monopoly status, how would this company operate in order to maximize profits (assuming the other firms leave permanently)? If you answer "no" in i, what will the large truck do?
iii) What would be the large truck's profits under your answer in ii?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.