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In Gelate,Pennsylvania,the Market for Compact Discs Has Evolved as Follows

Question 48

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In Gelate,Pennsylvania,the market for compact discs has evolved as follows:
There are two firms that each use a marquee to post the price they charge for compact discs.Each firm buys CDs from the same supplier at a cost of $5.00 per disc.The inverse market demand in their area is given by P = 10 - 2Q,where Q is the total output produced by the two firms.
a.Solve for the Bertrand equilibrium price and market output.
b.Would your answer differ if the products were not perfect substitutes?

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a.P = MC = $5.To find industry output,we...

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