Is it profitable for the two firms to merge

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Reference no: EM131082363

Firm A has overhead of $1,000 a year and can produce 1,000 units at a cost of $1 per unit and units beyond that at a cost of $3 per unit. Firm B has no overhead and can produce any number of units at a cost of $2 per unit. Firm A has 3,000 customers, and firm B has 2,000 customers. Is it profitable for the two firms to merge (i.e. would their combined costs decrease)? Assume the price and overall number of customers would stay the same.

Reference no: EM131082363

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