Question
Suppose firm 1 and firm 2 each produce the same product and face a market demand curve described by Q = 5000 200P. Firm 1
Suppose firm 1 and firm 2 each produce the same product and face a market demand curve described by Q = 5000 200P. Firm 1 has a unit cost of production MC1 = 6 whereas firm 2 has a higher unit cost of production MC1 = 10.
a. What is the Bertrand-Nash equilibrium outcome? What are the profits of each firm?
b. Is this outcome efficient in terms of allocative and productive efficiency?
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Macroeconomics Principles and Applications
Authors: Robert E. Hall, Marc Lieberman
6th edition
1111822352, 1111822354, 9781133708742 , 978-1111822354
