What is the equilibrium outcome in a Bertrand oligopoly with identical products and constant, identical marginal costs?
Explanation
In a homogeneous-product Bertrand oligopoly, intense price competition leads to a 'price war' where firms continuously undercut each other until the price falls to the marginal cost of production, mimicking the outcome of a perfectly competitive market.
Other questions
According to the conditions for Cournot oligopoly, what does each firm believe about its rivals' output decisions when it changes its own output?
What is the primary characteristic of a Sweezy oligopoly regarding firms' beliefs about their rivals' price reactions?
In the comparison of oligopoly models, what is the total industry output when two identical firms with a marginal cost of $4 and an inverse market demand of P = 1,000 - Q compete as Cournot duopolists?
What is a key feature of a Stackelberg oligopoly that distinguishes it from a Cournot oligopoly?
According to the comparison on pages 336-338, which oligopoly model results in the highest level of total industry output?
What defines a contestable market?
In a Cournot duopoly, a firm's reaction function defines what?
In Demonstration Problem 9-4, two Cournot duopolists face an inverse demand of P = 10 - (Q1 + Q2) and have zero costs. What is the Cournot equilibrium output for each firm?
What is an isoprofit curve in the context of a Cournot duopoly?
In the comparison of oligopoly models, what is the profit for each firm in the Bertrand equilibrium, given P = 1,000 - Q and MC = 4?
What happens to the Cournot equilibrium if one firm's marginal cost declines, according to Figure 9-8?
In the Stackelberg model with P = 1,000 - Q, MC1 = MC2 = 4, what is the profit-maximizing output for the leader firm?
Why do firms have an incentive to collude in a Cournot oligopoly, as illustrated in Figure 9-9?
According to the appendix, how does the reaction function in a differentiated-product Bertrand oligopoly differ from that in a Cournot oligopoly?
What is the key insight from 'Inside Business 9-2' regarding price competition and the number of sellers?
In Demonstration Problem 9-6, with an inverse demand of P = 50 - Q and MC = 2 for both firms, what is the Stackelberg leader's equilibrium output?
In the Sweezy model, what causes the 'kink' in the firm's demand curve?
According to the comparison on pages 336-338, which oligopoly model results in the highest price for the product?
What happens to a firm's reaction function in a Cournot oligopoly if its own marginal cost increases?
Which of the following is NOT a condition for a contestable market?
In a homogeneous-product duopoly, why is the collusive outcome often difficult to sustain?
What is the equilibrium price in the Cournot duopoly described in Demonstration Problem 9-4, where P = 10 - Q and MC = 0?
Comparing the four main oligopoly models, which one results in the lowest level of profit for the firms involved?
In the Stackelberg duopoly from Demonstration Problem 9-6 (P = 50 - Q, MC=2), what is the follower's equilibrium output?
Which condition is NOT a required characteristic of a Sweezy oligopoly?
In a Cournot oligopoly, what is the relationship between a firm's marginal revenue and the market price?
What is the primary reason for the 'price war' that occurs in a homogeneous-product Bertrand model?
In the comparison of oligopoly models, what is the profit earned by the Stackelberg follower, given P = 1,000 - Q and MC = 4?
What is the term for an oligopoly composed of only two firms?
Why might a firm in a Sweezy oligopoly not change its price even if its marginal costs change?
If two Cournot duopolists have an inverse market demand of P = 100 - (Q1 + Q2) and marginal costs of c1 = 10 and c2 = 20, what is Firm 1's reaction function?
What is meant by 'tacit collusion'?
In a Stackelberg oligopoly, the leader produces more output and earns more profit than the follower. What is this phenomenon called?
In the 'Inside Business 9-1' box, what did the South African company Telkom do to commit to a Stackelberg output?