Question

ording to the In the News, IN THE NEWS Joe Camel Acquires Newport In a widely anticipated move, Reynolds American, producer of best-selling brand Camel, announced yesterday that it has agreed to buy Lorillard, maker of Newport, the number 1 menthol cigarette. The $25 billion deal will combine the number 2 and number 3 cigarette manufacturers. The new company, retaining the Reynolds American name will have 35 percent of the US market, running second to Altria's 47 percent share. As part of the deal, Imperial Tobacco will purchase several of Lorillard's brands, including Blu, its popular e-cigarette, and end up with 10 percent of the market. Liggett Vector will keep 4 percent of the market Prior to merging. Reynolds had 25 percent of the market and Lorillard had 12 percent, with Imperial at 8 percent Reynolds expects to cut annual costs by $800 million through eliminating overlap in sales, production, and overhead costs. Consumers worry that reduced competition will raise cigarette prices and further limit choices. The deal must win antitrust approval before it is finalized Source: News reports, July 15-18.2014

help solve for b

Answer 1

Pet Reynoldi increases efgarette prices = 189. – 8%. demand price of elasticity = 0.46 -0.6 changes in Quantity demanded = Qp. Qp = -4.8% Hence Demand fall, by 4 8f, when price increases by Quantity 81%

Total increase in Revenue = (of increase in price) (I fall in Quantity demand = 8% - 4.85 = 3.24% Hence revenue will increase by 3.2% ie $10.416 billion. I 3.2% (13 billion) = 3.2x13 NE =$(0.416 billion
Answer is 0.416billion => 0.42billion