Two identical firms that share a market and produce a homogeneous good will find which of the following market outcomes LEAST desirable?

Question

Quizplus · Accepted Answer

In a Bertrand Oligopoly, firms compete on price, which will drive the price of the homogeneous good down to the marginal cost of production. Since the two firms are identical, they will have the same marginal cost, resulting in a price equal to marginal cost. This will result in zero profits for both firms, which is the least desirable outcome. In contrast, a Cournot Oligopoly or a Cartel may allow the firms to earn positive profits.

Two Identical Firms That Share a Market and Produce a Homogeneous