You are a member of the Justice Department. A group of competitive firms in the shoe...

 

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You are a member of the Justice Department. A group of competitive firms in the shoe industry announce that they plan a horizontal merger (a merger of all competitors) that will lead to a monopoly in this industry. Assume that all firms are maximizing profits. The demand for shoes in this industry is characterized by the following inverse demand function: P = 1000-Q a. Analyze the impact of the merger in a situation where the marginal costs and average costs of producing shoes are $500 per unit for the firms prior to the merger and they remain at $500 per unit after the merger. Show the before and after situations on the same graph and use sentences to describe how the merger will change the following: the price of shoes (2) i. ii. iii. iv. the quantity of shoes (2) consumer surplus (2) producer economic profits (2) Sentences for: Price: Quantity: Consumer Surplus: Producer Surplus (economic profits): You are a member of the Justice Department. A group of competitive firms in the shoe industry announce that they plan a horizontal merger (a merger of all competitors) that will lead to a monopoly in this industry. Assume that all firms are maximizing profits. The demand for shoes in this industry is characterized by the following inverse demand function: P = 1000-Q a. Analyze the impact of the merger in a situation where the marginal costs and average costs of producing shoes are $500 per unit for the firms prior to the merger and they remain at $500 per unit after the merger. Show the before and after situations on the same graph and use sentences to describe how the merger will change the following: the price of shoes (2) i. ii. iii. iv. the quantity of shoes (2) consumer surplus (2) producer economic profits (2) Sentences for: Price: Quantity: Consumer Surplus: Producer Surplus (economic profits):

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Before the merger the firms in the shoe industry are operating independently each producing at a marginal cost and average cost of 500 per unit Lets a... View the full answer