15.3 Two firms have costs of AC1 = MC1 = 20 and AC2 = MC2 =

16 respectively. Market demand is Q = 1000 − 40P.

a.

Suppose irms practice Bertrand competition, that is, setting prices for their identical products simultaneously. Compute the Nash equilibrium prices. (To avoid technical problems in this question, assume that if irms both have the same price, then the low-cost irm makes all the sales.)

b.

c.