Cheat'em Inc. and Overcharge Inc. compete in the mutual fund space. They both only produce one homogenous good: a passively managed S&P 500 Index fund. Both firms buy every stock in the index and neither firm adds any bells or whistles to the product. The marginal cost of providing the funds is 10 basis points. Suppose there exist two investors that know that the two funds are homogeneous and are therefore looking to get the best deal (i.e., the best price). Assume that both investors are willing to pay up to 100 basis points for this service.

10. Assume now the two firms have this interaction repeatedly over an infinite horizon. Suppose their discount rates are 1%. Which of the following statements is TRUE?

Group of answer choices

There will be price dispersion in the market.

All monkeys in fact hate bananas.

A Bertrand equilibrium will arise in which both firms will charge 10 basis points.

Each firm will charge slightly more than 10 basis points to cover all of their fixed costs, enough so that they have zero economic profits.

Each firm will charge 100 basis points.