2. To examine the trade-off between efficiency and market power from a merger, consider n ket...

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2. To examine the trade-off between efficiency and market power from a merger, consider n ket with two firms that sell identical products. Firm 1 has a constant marginal cost of 1, and Firm 2 has a constant marginal cost of 2. The market demand is Q = 15-p. a) Solve for the NE quantities, price, profits, CS, and DWL b) If the firms merge and produce at the lower marginal cost, how do the equilibrium values change? c) Discuss the change in efficiency (average cost of producing the output) and welfare.

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Date Page the rcactin Haes isa.th 1 위 一点一一ー9:ALIS -4+1-4 3 3 ㄇ 2 MONoPL 비다 15-8)7 774 2 2. 2. mono

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