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Which firm will serve the market

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Suppose four firms engage in price competition in a Bertrand setting where the lowest-price firm will capture the entire market. The firms differ with respect to their costs. Firm A's marginal cost per unit is $8, firm B's is $7, firm C's is $9, and firm D's is $7.50.

a. Which firm will serve the market? What price (approximately) will it charge?

b. Would your answer change if firms A and B had somewhat greater fixed costs of production than firms C and D?

Reference no: EM13880712

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