An incumbent’s threat to use limit pricing if a firm enters the market

An incumbent’s threat to use limit pricing if a firm enters the market

A) is credible if the firms have identical costs and market demand supports both firms.
B) is credible if the firms have different costs and market demand won’t support both firms.
C) is not credible if the firms have different costs and market demand won’t support both firms.
D) is cheap talk, because the other firm will enter and the incumbent will still be able to charge monopoly pricing.

ANSWER

B