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Which of the following statements is correct? For the Bertrand model to generate the Bertrand paradox, firms must have limite
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B. One way to avoid the Bertrand paradox is to replace the assumption that firms have unlimited capacities with the assumptions that firms have limited capacities

If the firms were to have a realistic assumption that is that they have capacity constraints or limited capacity, the firms would be producing as per their capacity and the rest of the demand or the residual would be catered by the other firm. This would lead to different outcomes than expected as per the model leading to the collapse of the Bertrand Paradox.

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