The market demand in a Bertrand duopoly is P 15 2Q and the

The market demand in a Bertrand duopoly is P = 15 - 2Q, and the marginal costs are $45. Fixed costs are zero for both firms. Which of the following statement(s) is/are true?

Select one:

a. Each firm earns $337.50 in profit.

b. P = $45.

c. None of the statements associated with this question are correct.

d. Each firm produces 15 units.

Solution

Option c. As at price of 45, there would be negative profits.

P

Q

TR

TC

0

7.5

0

337.5

5

5

25

225

10

2.5

25

112.5

15

0

0

0

20

-2.5

-50

-112.5

25

-5

-125

-225

30

-7.5

-225

-337.5

35

-10

-350

-450

40

-12.5

-500

-562.5

45

-15

-675

-675

P	Q	TR	TC
0	7.5	0	337.5
5	5	25	225
10	2.5	25	112.5
15	0	0	0
20	-2.5	-50	-112.5
25	-5	-125	-225
30	-7.5	-225	-337.5
35	-10	-350	-450
40	-12.5	-500	-562.5
45	-15	-675	-675