All the firms in a competitive industry have the same constant marginal cost. All the firms merge

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All the firms in a competitive industry have the same constant marginal cost. All the firms merge into a single firm.

a. If the merged firm’s marginal cost does not change, what happens to total surplus?

b. Use a graph to show that if the merged firm’s marginal cost falls, total surplus may rise.

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Managerial Economics and Strategy

ISBN: 978-0134167879

2nd edition

Authors: Jeffrey M. Perloff, James A. Brander

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Question Posted: Jul 26, 2018 12:29 PM

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All the firms in a competitive industry have the same constant marginal cost. All the firms merge

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a Assuming that the newly merged firm will exercise its new monopoly power surplus will de...View the full answer

Managerial Economics and Strategy

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