In a market with two competing firms, Firm A and Firm B, both firms decide to set their prices simultaneously. If both firms choose a price that maximizes their individual profits given the price of the other firm, they are said to be in which state?

In a market where two firms are competing, if Firm A and Firm B both set their prices in a way that maximizes their own profits while considering the price set by the other firm, they reach a situation called a Nash Equilibrium. This means that neither firm can improve its profits by changing its price alone, given the price of the other firm remains the same. For example, if Firm A sets its price at $10 and Firm B also sets its price at $10, they are both maximizing their profits based on each other's pricing. If either firm tries to change its price without the other changing theirs, it would lead to lower profits. Therefore, in this state, both firms have found a stable pricing strategy that they are unlikely to change.