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The marginal cost of both firms increases

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Suppose that two competing firms, A and B, produce a homogeneous good. Both firms have a marginal cost of MC = $50. Describe what would happen to output and price in each of the following situations if the firms are at (i) Cournot equilibrium, (ii) collusive equilibrium, and (iii) Bertrand equilibrium.

a. Because Firm A must increase wages, its MC increases to $80.

b. The marginal cost of both firms increases.

c. The demand curve shifts to the right.

Reference no: EM13321700

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