In the Bertrand Model

question 11

Multiple Choice

In the Bertrand model

• A)Each firm takes the quantities produced by its rivals as given
• B)Each firm takes the prices charged by its rivals as given
• C)One firm plays a leadership role and its rivals merely follow
• D)Prices are higher and quantities are slightly less than we would see if the firms colluded to achieve the monopoly outcome

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Definitions:

Stand-Alone Principle

A method of evaluating investment projects as if they were the only project the company is undertaking, assessing their viability on their individual merits.

Depreciation Tax Shield

The reduction in income tax that results from the allowance for depreciation, which can be considered a non-cash expense that decreases taxable income.

Equivalent Annual Cost

Equivalent annual cost is a financial analysis tool used to compare the cost effectiveness of different projects or investments with differing lifespans by calculating their equivalent cost per year.

EAC

Equivalent Annual Cost, a financial analysis tool used to compare the cost effectiveness of different investments or projects over their lifecycles.