Bertrand duopolists, Firm 1 and Firm 2, face inverse market demand $P = 50 - Q$ and both have marginal cost, $M C = \$ 20$. The equilibrium output this market will be:
A) 15
B) 20
C) 30
D) 40

Question

Quizplus · Accepted Answer

In a Bertrand duopoly with identical products and costs, firms compete by setting prices. The equilibrium occurs where price equals marginal cost, $P = MC$, given the demand function $P = 50 - Q$. Setting $MC = \$20$ equal to price gives $20 = 50 - Q$, solving for $Q$ gives $Q = 30$. This is the total market quantity produced and sold by the duopolists combined.

Bertrand Duopolists, Firm 1 and Firm 2, Face Inverse Market P=50−QP = 50 - QP=50−Q

Bertrand Duopolists, Firm 1 and Firm 2, Face Inverse Market $P = 50 - Q$