What would be the effect on the equilibrium price

Assignment Help Econometrics

Reference no: EM13190715

Two cournot duopolists produce in a market with a demand P(Q)=100-Q. The marginal cost for Firm 1 is constant and equals 10. The marginal cost for Firm 2 is constant and equals 25. The two firms want to merge, which would leave a monopoly. They argue that the merger should be approved because all output would be at the low margina cost of 10 after the merger. ie, firm 2's facilities would be shut down and all output shifted to firm 1's more efficient facilities.

a. What would be the effect on the equilibrium price of allowing the merger to proceed?

b. Assuming that firm 1 is buying firm 2, once the deal is complete, will its profits be high enough to come out ahead after having bought out firm 2?

Reference no: EM13190715

Questions Cloud

Determine how much labor is needed : Suppose the following equations are true: Production Function: Q = K1/3L2/3, which means MPK = 1/3K-2/3L2/3,MPL = 2/3K1/3L-1/3 MRTS = 2(K/L) Total Cost = rK + wL r = .2 w = $5

Design an experiment that will examine the question : Design an experiment that will examine the question: "who will learn more about psychology those students enrolled in a traditional course or those enrolled in a distance learning course."

Clean up waste of your homes : People are more likely to clean up waste in their homes than at a community park because people expect the community park to be dirty.

Write a paper discussing threads vs processes : Write a paper discussing Threads vs Processes. What is a Thread? What is a Process? How are they different? How are they the same? What types of problems lend themselves to Threads?

What would be the effect on the equilibrium price : Two cournot duopolists produce in a market with a demand P(Q)=100-Q. The marginal cost for Firm 1 is constant and equals 10. The marginal cost for Firm 2 is constant and equals 25. The two firms want to merge, which would leave a monopoly.

Compute the concentrations of h2so3 : Calculate the concentrations of H2SO3, HSO3-, SO32-, H3O+ and OH- in a 0.025M H2SO3. The pH is 1.88 and the Ka1= 1.5 x 10-2 and Ka2 = 6.3 x 10-8.

Adolescence experience a lot of changes mentally-physically : Adolescence experience a lot of changes mentally and physically. How does your family and friends react to these physical and cognitive changes? Give examples. Please answer in 120 words or less.

What is the range of discount rates : FULL KARMA FOR COMPLETE RESPONSES. In an infinitely repeated game between two firms, suppose that each earns a payoff of 20 if they collude on price and 20 if they compete on price. If one firm sets the collusive price and the other "cheats", the ..

Define what is the rate of reaction of o2 : What is the rate of reaction of O2? What is the rate of formation of N2O5?

User Account

All Pages