Multiple Choice
-Consider Figure 8.3, which depicts two firms producing a homogeneous product at the same constant marginal cost. The Bertrand-Nash equilibrium:
A) Is for both firms to charge a zero price.
B) Is for both firms to charge a price of PO.
C) Is for both firms to charge a price between PN and PO, such as P*.
D) Is for both firms to charge a price of PN.
E) Is for the firm to enter the market first to charge a price of PN, while the second firm charges a price that is between PN and PO, such as P*.
Correct Answer:
Verified
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