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      Question

      Which of the following best describes Bertrand

      competition?
      A A market structure where a single firm controls the entire supply of a unique product, allowing it to set prices above marginal cost and earn substantial profits. Correct Answer Incorrect Answer
      B A model of competition where firms differentiate their products and engage in extensive advertising to attract customers, leading to prices that are typically well above marginal cost. Correct Answer Incorrect Answer
      C A form of competition in which two or more firms produce a homogenous good and compete by setting prices. In theory, this leads to prices equal to marginal cost and zero economic profits for the firms. Correct Answer Incorrect Answer
      D A scenario where a small number of firms collude to restrict output and raise prices, behaving like a monopolist to maximize their collective profits. Correct Answer Incorrect Answer

      Solution

      Bertrand competition is best described as a form of competition in which two or more firms produce a homogeneous good and compete by setting prices. In theory, this competition drives prices down to marginal cost, leading to zero economic profits for the firms.

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