Consider an industry consisting of two firms producing an identical product. The inverse market demand equation is P = 2.5 – Q/2.

  1. Consider an industry consisting of two firms producing an identical product. The inverse market demand equation is P = 2.5 – Q/2. The total cost equations for firms 1 and 2 are TC1 = Q1 and TC2 = Q2, respectively. Suppose that the two firms are Bertrand competitors. Firm 1 will earn a profit of:
  2. 1/4.
  3. 0.
  4. 1/2.
  5. 5/6.
  6. 3/4.