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Intermediate Microeconomics and Its Application 12th Edition by Walter Nicholson,Christopher Snyder
Edition 12ISBN: 978-1133189022Intermediate Microeconomics and Its Application 12th Edition by Walter Nicholson,Christopher Snyder
Edition 12ISBN: 978-1133189022 Exercise 33
Suppose firms A and B operate under conditions of constant marginal and average cost but that MCA = 10 and MCB = 8. The demand for the firms' output is given by
Q = 500 - 20P.
a. If the firms practice Bertrand competition, what will the Nash-equilibrium market price be? (It may help to assume that prices can only be in increments of a penny, so that prices of 9.98, 9.99, and 10 are possible, but not 9.995.)b. What will the profits be for each firm?
c. Which aspects of the Bertrand Paradox show up in this example, if any?
Q = 500 - 20P.
a. If the firms practice Bertrand competition, what will the Nash-equilibrium market price be? (It may help to assume that prices can only be in increments of a penny, so that prices of 9.98, 9.99, and 10 are possible, but not 9.995.)b. What will the profits be for each firm?
c. Which aspects of the Bertrand Paradox show up in this example, if any?
Explanation
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Bertrand competition is a model of oligo...
Intermediate Microeconomics and Its Application 12th Edition by Walter Nicholson,Christopher Snyder
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