Two firms are in Bertrand competition with differentiated goods. Firm A faces the demand curve q_A = 40 - P_A + 0.50P_B.What is Firm A's total revenue?

Question

Quizplus · Accepted Answer

Firm A's total revenue can be calculated using the equation TR = P × Q, where P is the price and Q is the quantity sold. Firm A's demand curve is q_A = 40 - P_A + 0.50P_B, which can be rewritten as P_A = 40 - q_A + 0.50P_B. Substituting this into the TR equation gives TR_A = (40 - q_A + 0.50P_B)q_A, which simplifies to TR_A = 40P_A - q_A^2 + 0.50P_AP_B. Therefore, choice A is the correct answer.

Two Firms Are in Bertrand Competition with Differentiated Goods