Study Guide for Microeconomics
9th Edition
ISBN: 9780134741123
Author: Robert Pindyck, Daniel Rubinfeld
Publisher: PEARSON
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Question
Chapter 12, Problem 4E
(a)
To determine
The reaction
(b)
To determine
The output of each firm.
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Consider a market with four firms. Firms A and B have a marginal cost of $7. Firm C has a marginal cost of $11. Firm D has a marginal cost of $5. What occurs if the firms compete in the Bertrand model?
Group of answer choices
None of the other answers are correct.
Firm D will capture the entire market with a price of $6.99.
All four firms will each have one quarter of the market with a price of $11.
Firms A and B will each have half the market with a price of $7.00.
Firm D will capture the entire market with a price of $5.00.
This pertains to the Cournot model except that
a. Both firms maximize profit
b. Each firm anticipates the price movement of the other
c. There are only 2 firms in the industry
d. Each firm takes the output as given
In the Bertrand model, suppose that each firm has a marginal cost of £5 and that firm 1 sets a price of £5, which of the following a best-response for firm 2? Click all the correct answers.
£5.00
£4.98
£4.99
£5.20
£5.01
Chapter 12 Solutions
Study Guide for Microeconomics
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