Which of the Following Is NOT True About a Differentiated-Product

question 105

Multiple Choice

Which of the following is NOT true about a differentiated-product Bertrand duopoly?

• A) Firm 1 and firm 2's prices will be equal to marginal cost.
• B) Firm 1's price will always be above marginal cost, while firm 2's price will be less than marginal cost.
• C) Firm 1's price will always be less than marginal cost, while firm 2's price will be above marginal cost.
• D) None of the preceding answers is correct.

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Definitions:

Discount Rate

The interest rate used in discounted cash flow analysis to determine the present value of future cash flows.

Lag Strategy

A deliberate decision to not be a first mover in an industry or market, observing and reacting to competitors' actions.

Straddle Strategy

A trading strategy that involves purchasing both a call option and a put option for the same underlying asset, with the same strike price and expiration date, allowing investors to benefit from significant price movements in either direction.

Leading Strategy

A forward-thinking approach in business or military operations that involves taking proactive measures to achieve a competitive advantage or fulfill objectives.