Let Firm a Face Demand Curve Q_A = 100 -

question 6

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 are the Bertrand Equilibrium prices in this market?

• A) P_B = 72.5; P_A = 70
• B) P_B = P_A = 73.33
• C) P_B = 74; P_A = 87
• D) P_B = P_A = 74

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