Consider the Bertrand model and answer the question below related to the content. Assume that each firm in the Bertrand Duopoly model can only choose non-negative integer quantities: 0, 1, 2, ... . Assume the demand is Q(P)=10-P and the marginal cost is 0 for each firm. Given this information, which of the following is FALSE? [Hint: Check values of profit functions.]   A. If firm 2 sets price equal to 1, then the best response of firm 1 to this price is 1   B. If firm 2 sets price equal to 4, then the best response of firm 1 to this price is 4   C. If firm 2 sets price equal to 2, then the best response of firm 1 to

ENGR.ECONOMIC ANALYSIS
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Consider the Bertrand model and answer the question below related to the content.

Assume that each firm in the Bertrand Duopoly model can only choose non-negative integer quantities: 0, 1, 2, ... . Assume the demand is Q(P)=10-P and the marginal cost is 0 for each firm. Given this information, which of the following is FALSE? [Hint: Check values of profit functions.]

  A.

If firm 2 sets price equal to 1, then the best response of firm 1 to this price is 1

  B.

If firm 2 sets price equal to 4, then the best response of firm 1 to this price is 4

  C.

If firm 2 sets price equal to 2, then the best response of firm 1 to this price is 1 

Bertrand Duopoly
Q
a
Q(P)
slope = -b
· P
a/b
Transcribed Image Text:Bertrand Duopoly Q a Q(P) slope = -b · P a/b
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