The Market Demand in a Bertrand Duopoly Is P =

question 85

Multiple Choice

The market demand in a Bertrand duopoly is P = 10 - 3Q, and the marginal costs are $1.Fixed costs are zero for both firms.Based on this information we can conclude that

• A)P = $7 and firm 1 will sell 7 units of output.
• B)P = $1 and firm 1 and 2 will each sell 7 units of output.
• C)P = $1 and firm 1 and 2 will each sell 3.5 units of output.
• D)P = $1.5 and firm 1 and 2 will each sell 10 units of output.

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Definitions:

Production Possibilities Curve

A graph that shows the various combinations of outputs that a society can produce if all its resources are being used efficiently.

Trading Possibilities Curve

A graph that shows the maximum amount of goods a country can produce, given its resources, and hence the possible extents of trade with other countries.

International Exchange Ratio

The rate at which the goods and services of one country can be traded for those of another.

Production Possibilities Curves

A graphical representation that shows the maximum possible output combinations of two goods or services an economy can produce given its available resources and technology.