Question

Contrast the market equilibria in Bertrand competition with identical products and with differentiated produces What is...

  1. Contrast the market equilibria in Bertrand competition with identical products and with differentiated produces
  2. What is the market equilibrium in Bertrand competition with identical goods?
  3. Why do firms in monopolistic competition not reach the perfectly competitive equilibrium?
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Answer #1

Market equilibrium in Bertrand competition is always at a point where price=marginal cost.

P1=P2=marginal cost=c

firms in monopolistic competition doesnot reach perfectly competitive equilibrium because monopolistic competitive firm has marginal revenue less than average revenue whereas in perfect competition marginal revenue=average revenue. And in both market firm produces at a point where MR=MC.

thus in perfect competition, AR=MC and monopolistic competition MR=MC

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