Suppose that there are two firms producing an identical product for sale in the same market. The

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Suppose that there are two firms producing an identical product for sale in the same market. The market demand for the product is given by the equation Q = 1,200 − P.

Each firm has a marginal cost of MC = 0. Neither firm incurs a fixed cost.

Firms 1 and 2 have 200 units and 300 units of capacity, respectively.

a. What is the Bertrand-Nash equilibrium?

b. What is each firm’s profit?

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