Question

In a Bertrand model, market power is a function of

Part A:

A)	price elasticity of supply.

B)	product differentiation.

C)	the number of firms.

D)	marginal cost.

Mergers often increase profit by

Part B:

A)	producing economies of scope.

B)	increasing efficiency of the firm.

C)	producing economies of scale.

D)	All of the above.

Answer 1

Part A:  Ans: B ) product differentiation.

Explanation:

Product differentiation is the main assumption of Bertrand model.

Part B : Ans: D ) All of the above

Explanation:

Mergers leads economies of scope and economies of scale in the  production process which increases efficiency of the firm. So we can conclude that mergers often increase profit by the economies of scope and economies of scale in production and increases efficiency of the firm.