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) \(\$ 76.5\)

---

Definitions:

Binding Decisions

Decisions that are legally enforceable and must be adhered to by the parties involved.

Labor Union

An organization that represents the collective interests of workers in negotiations with employers over wages, working conditions, and other employment terms.

Employee Benefits

Various types of non-wage compensation provided to employees in addition to their normal wages or salaries.

Neutral Third Party

An independent person or entity that is not involved in any side of a conflict or negotiation, offering assistance in resolving disputes without bias.