Firm A has a strictly higher marginal cost than firmB.They compete in a homogeneous product Bertrand duopoly.Which of the following results will NOT occur? A) Q_A

Question

Firm A has a strictly higher marginal cost than firmB.They compete in a homogeneous product Bertrand duopoly.Which of the following results will NOT occur? A) Q_A < Q_B B) Profit_A = 0 < Profit_B C) Revenue of firm A < Revenue of firm B D) Price_A < Price_B

Quizplus · Accepted Answer

In a Bertrand duopoly with homogeneous products, the firm with the lower marginal cost (Firm B) sets the price just below the marginal cost of the higher-cost firm (Firm A), capturing the entire market. Therefore, the prices charged by both firms will be equal to Firm B's price, which is just below Firm A's marginal cost, making option D incorrect as it suggests Firm A would charge a lower price than Firm B.

Firm a Has a Strictly Higher Marginal Cost Than FirmB