20.1 Suppose firms A and B operate under conditions of constant average and marginal cost, but that...

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20.1 Suppose firms A and B operate under conditions of constant average and marginal cost, but that MCA 10, MCB 8. The demand for the firms’ output is given by Q D 500 20P.

a. If the firms practice Bertrand competition, what will be the market price under a Nash equilibrium?

b. What will the profits be for each firm?

c. Will this equilibrium be Pareto efficient?

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