Bertrand duopolists, Firm 1 and Firm 2, face inverse market demand $P = 50 - Q$ and both have marginal cost, $M C = \$ 20$ . The equilibrium industry profits this market will be
A) 0
B) 10
C) 50
D) 90

Question

Quizplus · Accepted Answer

In a Bertrand duopoly with identical products and constant marginal costs, firms will undercut each other's prices until the price equals marginal cost. Therefore, the equilibrium price will be $P = MC = 20$, leading to zero economic profits for both firms.

Bertrand Duopolists, Firm 1 and Firm 2, Face Inverse Market P=50−QP = 50 - QP=50−Q

Bertrand Duopolists, Firm 1 and Firm 2, Face Inverse Market $P = 50 - Q$