Firm A has a strictly higher marginal cost than firm B. They compete in a homogeneous product Bertrand duopoly. Which of the following results will NOT occur? A) Q_A

Question

Firm A has a strictly higher marginal cost than firm B. They compete in a homogeneous product Bertrand duopoly. Which of the following results will NOT occur? A) Q_A < Q_B B) Profit_A = 0 < Profit_B C) Revenue of firm A < Revenue of firm B D) Price_A < Price_B

Quizplus · Accepted Answer

In a Bertrand duopoly with homogeneous products, both firms will set prices equal to the marginal cost of the firm with the lower cost, so Price_A cannot be less than Price_B.

Firm a Has a Strictly Higher Marginal Cost Than Firm