Suppose that an industry consists of two firms producing an identical product in which there is no brand loyalty by consumers. The inverse market demand for the combined output of both firms is P = 5 !0.001 (QA + QB) . The marginal cost of production by firm A and firm B are $2 and $1, respectively. Firm A charges a price of:
A) $2.00.
B) $2.50.
C) $2.67
D) $3.33
E) None of the above.
Correct Answer:
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