Which statement best describes a Nash equilibrium applies to price competition? 1. Two firms cooperate and set the price that maximizes joint profits. 2. Each firm automatically moves to the purely competitive equilibrium because it knows the other firm will eventually move to that price away. 3 given the prices chosen by its competitors, no firm has an incentive to change their prices from the equilibrium level. 4. One dominant firm sets the price, and the other firms take that’s price as if it were given by the market. 5. None of the above.

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