Imagine that you are managing a small firm and thinking about entering the market of a monopolist. The monopolist is currently charging a high price, and you have calculated that you can make a nice profit charging 10% less than the monopolist. Before you go ahead and challenge the monopolist, what possibility should you consider for how the monopolist might react?

Before entering the market as a small firm, you should consider the possible reactions of the monopolist, such as lowering prices to match or undercut your firm, improving their product or service to maintain consumer loyalty, or engaging in aggressive marketing tactics. Evaluate the potential outcomes for your firm in each scenario and weigh the risks and benefits of entering the market. If the monopolist's reaction is likely to be aggressive and the potential outcomes are unfavorable, it may be too risky to enter the market. However, if the monopolist is unlikely to react aggressively or if you can successfully compete despite their reaction, entering the market could be a good business decision.