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

question 15

Multiple Choice

Let firm A face demand curve $Q _ { A } = 100 - P _ { A } + .5 P _ { B }$ and firm $\mathrm { B }$ 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 the equation of firm B's (price) reaction function?

• A) \(P _ { B } = 50 - .5 P _ { A }\)
• B) \(P _ { B } = 55 - .25 P _ { A }\)
• C) \(P _ { B } = 55 + .25 P _ { A }\)
• D) \(P _ { B } = 50 + .5 P _ { A }\)

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Definitions:

Hexagonal

Relating to a shape or object having six angles and sides, often used in reference to cross-sectional shapes of bolts or nuts.

Abbreviation

A shortened form of a word or phrase used for convenience.

M

Often used as an abbreviation for "meter" in metric measurements or as a designation for thousands in units of measure.

Internal Threads

The threads located within a hole or bore, allowing for the screwing in of a mating part with external threads.