The Bertrand model of oligopoly reveals that:
A) capacity constraints are not important in determining market performance.
B) perfectly competitive prices can arise in markets with only a few firms.
C) changes in marginal cost do not affect prices.
D) All of the statements associated with this question are true.

Question

Quizplus · Accepted Answer

The Bertrand model of oligopoly shows that under certain assumptions (such as perfect substitutes and simultaneous price-setting), firms will compete down to marginal cost and achieve the same outcome as if the market were perfectly competitive. This means that perfectly competitive prices can arise in markets with only a few firms, making option B the correct choice. Options A and C are incorrect as capacity constraints and changes in marginal cost can still affect market performance in other models of oligopoly. Option D is incorrect as only option B is true.

The Bertrand Model of Oligopoly Reveals That