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

question 47

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 are the Bertrand Equilibrium prices in this market?

• A) \(P _ { B } = 72.5 ; P _ { A } = 70\)
• B) \(P _ { B } = P _ { A } = 73.33\)
• C) \(P _ { B } = 74 ; P _ { A } = 87\)
• D) \(P _ { B } = P _ { A } = 74\)

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Definitions:

Straight-Line Depreciation

A method of allocating the cost of a tangible asset over its useful life in equal annual amounts.

Net Income

The total profit of a company after all revenues, gains, expenses, and losses have been accounted for.

Average Rate of Return

A financial metric used to evaluate the profitability of an investment, calculated by dividing the average annual profit by the initial investment cost.

Present Value Factors

Numerical factors used in calculating the present value of a future amount, considering the time value of money.