Suppose that the only two firms in an industry face the market (inverse) demand curve p = 100 – Q. Each has constant marginal cost equal to 10 and no fixed costs. Initially, the two firms compete as Cournot rivals (Chapter) and each produces an output of 30. Why might these firms want to merge to form a monopoly? What reason would antitrust authorities have for opposing the merger?
Answer to relevant QuestionsIn Question 3.1, now suppose that each firm has fixed costs, F, of 300. Merging would imply that the monopoly firm would pay fixed costs of 300. How would your answer change?Let H = E – E be the amount that emissions, E, are reduced from the competitive level, E. The benefit of reducing emissions is B(H) = AHα. The cost is C(H) = Hß. If the benefit is increasing but at a diminishing rate in ...To prevent overfishing, could regulators set a tax on fish or on boats? Explain and illustrate with a graph.Do publishers sell the socially optimal number of managerial economics textbooks? Discuss in terms of public goods, rivalry, and exclusion. Carrot Patch Dolls, a small doll producer in Malaysia, is considering producing a new doll variety. Production of this doll type requires an initial setup cost, followed by constant variable cost. The cost function of ...
Post your question