If two firms are in Bertrand competition they:
A)compete in quantities.
B)minimize cost.
C)do not maximize profit.
D)compete in prices.

Question

Quizplus · Accepted Answer

In Bertrand competition, firms compete in prices. Each firm chooses a price and consumers choose between the two firms based on these prices. If one firm's price is lower, it will capture a larger share of the market. Therefore, both firms have an incentive to set the lowest possible price, leading to a price war and ultimately driving down profits for both firms.

If Two Firms Are in Bertrand Competition They