How much profit does each firm earn

Assignment Help Business Economics

Reference no: EM1372370

Q. You are CEO of Clip It, a paper clip manufacturer. Your company enjoys a patented technology that allows it to produce paper clips faster and at a lower cost than your only rival, Fasten It. Clip it uses this advantage to be first to choose its profit-maximizing output level in market. Inverse demand function for paper clips is P=500-2Q, Clip It's costs are Cc (Qc)=2Qc and Fasten It's costs are Cf (Qf)=4Qf.

a. What is Clip its profit-maximizing output level? Fasten It's?

b. What is market's equilibrium price?

c. How much profit does each firm earn?

d. Ignoring antitrust considerations, would it be profitable for your firm to merge with Fasten It? If not, explain why not; if so, put together an offer that would permit you to profitably complete merger.

Reference no: EM1372370

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