Sue and Jane own two local gas stations.They have identical constant marginal costs,but earn zero economic profits.Sue and Jane constitute:
A) a Sweezy oligopoly.
B) a Cournot oligopoly.
C) a Bertrand oligopoly.
D) None of the preceding answers is correct.

Question

Quizplus · Accepted Answer

Sue and Jane owning two local gas stations and charging the same price and having identical marginal costs implies that they are in a Bertrand oligopoly. In a Bertrand oligopoly, the firms set prices rather than quantities, and they both are likely to keep prices low enough that they earn zero economic profit.

Sue and Jane Own Two Local Gas Stations