Question

Suppose that the only two firms in an industry face the market (inverse) demand curve p- 130-Q. Each has constant marginal cost equal to 4 and no fixed costs. Initially the two firms compete as Cournot rivals (Chapter 11) and each produces an output of 42. Why might these firms want to merge to form a monopoly? What reason would antitrust authorities have for opposing the merger? (Hint: Calculate price, profits, and total surplus before and after the merger.) The firms would favor the merger because combined profit would increase by $ Antitrust regulators would oppose the merger because consumer surplus would decrease by $ and the profit-maximizing price would ncrease by $ Enter your response rounded to two decimal places.) Enter your response rounded to two decimal places.)

Answer 1

130 13o -2 Эд 126 га Zo 4otal ovtput rofit ma ximi2in 6- x63 67x68- 1225 2 rO witmout me 2. 2. 1182- 168 "Tome profit

Consunt Suvplus 63 = ,984-5 Total Surpws198y5r 396 MIR 63 2 3529 MK 8y Total S lo 102.5