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Domino Sugar Company is considering buying Fisher Honey Company for $100 million. Based on information obtained from 500 supermarkets around the country, when the price of 1 lb. of Domino Sugar went on sale from $2.00 to $1.50, the average number of 1 lb. boxes of sugar rose from 200 boxes in a week to 300 boxes. The following week, when 1 lb. boxes of Fisher Honey went on sale for $2.50 from the original price of $3.00, the number of boxes of honey sold increased from 200 to 275 boxes. If the sale of Fisher Honey to Domino Sugar goes through, what changes to each products price Domino Sugar make?
a. No change
b. Increase the price of both, but increase the price of Domino Sugar more
c. Increase the price of both, but increase the price of Fisher Honey more
d. Lower the price of both
What amount of profit is the firm earning? Is this firm in a short-run or long-run equilibrium? Why?
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