Let Firm a Face Demand Curve Q_A = 100 -

question 35

Multiple Choice

Let firm A face demand curve Q_A = 100 - P_A + .5P_B and firm B face demand curve Q_B = 100 - P_B + .5P_A. Products A and B both have constant marginal cost of production of 10 per unit (and no fixed cost) . Each firm acts as a Bertrand competitor. What is firm B's profit-maximizing price when firm A sets a price of $70 for its good?

• A) $70
• B) $72.5
• C) $74
• D) $76.5

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