10)Consider two firms producing the same good for a common market. Firm 1 has the cost...
10)Consider two firms producing the same good for a common market. Firm 1 has the cost function ofc(q1)=2q1 and firm 2 has the cost function of c(q2)=q2. Assuming they compete as Bertrandduopolists, what price would you expect to prevail?
a)1
b)2.5
c)2
d)3
need explain！
Homework Answers
Under the Bertrand Model, firms compete until price becomes equal to MC of production.
MC1 = 2
MC2 = 1
Firm 2 is more efficient , so it will survive the competition. Actual price will be $ 1
Answer: ( A)
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