If Bertrand price competitors incur recurring fixed costs, it will still be a Nash equilibrium for price to equal marginal cost.

Answer the following statement true (T) or false (F)


False

Rationale: At price equal to marginal cost, the firms would make a negative profit (if marginal cost is constant) when there is a recurring fixed cost. They would therefore not be best-responding to each other by setting price equal to marginal cost.

Economics

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