Is it reasonable and ethical to apply for two PhD positions with two different professors at the same faculty and the same institution?
Yes, it's ethical. Everyone applies to multiple positions. Everyone knows this. At least this is my impression from the US. You don't say which country, so it's unclear who might be funding your position if you're eventually accepted. It's also unclear if you apply to the university, department, or professor directly. This might have some slight influence on whether you tell A and B about your cross applications. If they are going to be meeting together in committee to decide about applications, it might be better if everyone knows that you've applied to work with two different professors but really only once to the university. If each professor has sole discretion as to whom they hire, and only they see the application, then it probably doesn't matter.