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In: Economics

Two firms both produce leather boots. The inverse demand equation is given by P = 280 - Q, where P is the price of boots in USD/pair and Q is quantity of boots in million pair

Two firms both produce leather boots. The inverse demand equation is given by P = 280 - Q, where P is the price of boots in USD/pair and Q is quantity of boots in million pair. The cost function is given by: C(Q) = 40Q. If the two firms are Bertrand oligopolists, the profit for each firm is equal to:

Group of answer choices

100

10

1000

0

Solutions

Expert Solution

Correct : 0

C = 40Q

MC = 40

In Bertrand competition, P=MC

280 - Q = 40

Q= 240

Each firm sells 240/2= 120

Each firm's profit = Pq - C

= 40*120 - 40*120 = 0

Rahul Sunny answered 2 years ago
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