Suppose two firms with differentiated products are competing on price. The reaction curve for Firm 1 is P1 = 4 + 0.5 P2, and the reaction curve for Firm 2 is P2 = 4 + 0.5P1. What is the equilibrium price outcome in this market?

A) P1 = P2 = 4
B) P1 = P2 = 6
C) P1 = P2 = 8
D) P1 = 6 and P2 = 8


C

Economics

You might also like to view...

Suppose policy makers want to increase GDP by $450 billion. If the marginal propensity to consume is 0.9, by how much must taxes decrease to achieve this target?

What will be an ideal response?

Economics

In the case of negative externalities in production, the firm's internal costs:

a. exceed the external costs. b. are less than the external costs. c. equal the external costs. d. understate the true cost of producing the product. e. overstate the true cost of producing the product.

Economics

Tariffs and quotas are used to promote trade with foreign countries

Indicate whether the statement is true or false

Economics

Assume you have $2,000 in a savings account at the beginning of the year and the price level is equal to 100. If the price level is equal to 120 at the end of the year, the real value of your savings is closest to

A. $1,880. B. $2,120. C. $1,667. D. $2,400.

Economics