Suppose there are two firms, Boors and Cudweiser, each selling nonalcoholic beer

Question

Suppose there are two firms, Boors and Cudweiser, each selling nonalcoholic beer. Suppose Boors and Cudweiser are not viewed as perfect substitutes but rather demand for Boors is and demand for Cudweiser is . Marginal revenue for Boors and Cudweiser are as follows: MRB=5000-2000PB+100PC and MRC=3000-3000PC+100PB. For simplicity, assume zero marginal costs. Which of the following is the Bertrand reaction function for Boors? a. PB = -2.5 + .05PC b. PB = 2.5 + .05PC c. PC = 2.5 - .05PB d. PB = 2.5 - .15PC 2) Consider the market for nonalcoholic beers from the previous question. Which of the following is the Bertrand reaction function for Cudweiser? a. PC = 1 + .033PB b. PC = 1 - .033PB c. PC = 1.5 + .075PB d. PB = 1.5 + .075PC 3) Consider the market for nonalcoholic beers from the previous question. Respectively, Boors

Explanation / Answer

b. 2.55

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