Scenario: Suppose There Are Only Two Firms in an Industry

question 150

Multiple Choice

Scenario: Suppose there are only two firms in an industry, and their products are perfect substitutes for each other. Each firm had a fixed marginal cost of $5 and zero fixed cost of operation. The highest the consumers of this product are willing to pay for it is $10, and there are 200 consumers in this market.
-Refer to the scenario above.Suppose Firm 1 and Firm 2 have to come up with a pricing strategy simultaneously.In this case,Firm 1 will charge ________,and firm 2 will charge ________.

• A) $10; $10
• B) $10; $5
• C) $5; $10
• D) $5; $5

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