(1) As a firm differentiates its product relative to its competitor's productIts cost curves shift downward relative to those of its competitorsIs cost curves shift upward relative to those of its competitorsIts demand curve becomes more horizontal in P and Q spaceIts demand curve becomes more negative in P and Q space(2) In the classic Bertrand model of oligopoly (e.g., a duopoly with no capacity constraints, product differentiation or innovation), price for each firm will be setat the monopoly priceabove MCat MCbelow MC

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Answered: (1) As a firm differentiates its…

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter15: Oligopoly And Strategic Behavior

Section: Chapter Questions

Problem 8P

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(1) As a firm differentiates its product relative to its competitor's product

Its cost curves shift downward relative to those of its competitors
Is cost curves shift upward relative to those of its competitors
Its demand curve becomes more horizontal in P and Q space
Its demand curve becomes more negative in P and Q space

(2) In the classic Bertrand model of oligopoly (e.g., a duopoly with no capacity constraints, product differentiation or innovation), price for each firm will be set

at the monopoly price
above MC
at MC
below MC

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