Suppose that we have only two firms in the market with constant marginal costs of C1 and C2 respectively such that C1 > C2. What is the Bertrand equilibrium in this market? How is it different from the competitive equilibrium?

3Medium

Solve for the equilibrium levels of output denoted (respectively by Y*_w and Y**_w) in the two scenarios-presence and absence of income tax in the economy.

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