> Consider the case in which Anne is a Knave. If Anne answers "Yes", then they are not both knights.
Anne is lying, so it could be that either Bernie is a knight and she is a knave _or_ they are both knaves.
> If Anne answers "No", then they are both knights. But Anne is a knave, so this leads to a contradiction.
Yup, so that will never happen. So if she responds "No" she is a knight and Bernie is a knave.
In essence, if she responds yes there is no way to tell how many there are. Thus, she responded "No". So there is 1 kinght and 1 knave.