One Criticism of the Bertrand Pricing Model Is That

question 13

Multiple Choice

One criticism of the Bertrand pricing model is that

• A) the model is implausible when there is product differentiation.
• B) when there is an oligopoly with no product differentiation, the model's prediction is inconsistent with reality.
• C) the model's predicted price is solely a function of demand conditions.
• D) the model's predicted price is dependent on the number of firms.

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Definitions:

Long-Run Average Cost

The per-unit cost of production in the long-term, where all input factors are variable, indicating economies or diseconomies of scale.

Upward-Sloping

Describes a line on a graph that demonstrates an increase in value as it moves to the right, often used to represent increases in costs or prices.

Diseconomies of Scale

Diseconomies of scale occur when a company or business grows so large that the costs per unit increase, leading to decreased efficiency.

Diminishing Marginal Returns

A principle stating that as additional units of a variable input are added to a fixed input, the additional output produced from each new unit will eventually decrease.