Let Firm a Face Demand Curve $Q _ { A } = 100 - P _ { A } + .5 P _ { B }$

question 34

Multiple Choice

Let firm A face demand curve $Q _ { A } = 100 - P _ { A } + .5 P _ { B }$ and firm B face demand curve $Q _ { B } = 100 -$ $P _ { B } + .5 P _ { A }$ . Products $\mathrm { A }$ and $\mathrm { B }$ both have constant marginal cost of production of 10 per unit (and no fixed cost) . Each firm acts as a Bertrand competitor. What is firm B's profit-maximizing price when firm A sets a price of $\$ 70$ for its good?

• A) \(\$ 70\)
• B) \(\$ 72.5\)
• C) \(\$ 74\)
• D) \(\$ 76.5\)

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Definitions:

Interest Rate

The percentage charged on a sum of money borrowed or earned on a sum of money invested, typically expressed as an annual percentage rate.

Saving

The portion of income not spent on current consumption but set aside for future use, often put into investments or deposit accounts.

Investment

Allocation of resources, usually money, to generate income or profit, including purchases of bonds, stocks, or property.

Great Depression

A severe worldwide economic downturn that took place during the 1930s, marked by high unemployment, deflation, and a significant fall in economic activity.