Question: The market for a standard sized cardboard container consists of

The market for a standard- sized cardboard container consists of two firms: CompositeBox and Fiberboard. As the manager of CompositeBox, you enjoy a patented technology that permits your company to produce boxes faster and at a lower cost than Fiberboard. You use this advantage to be the first to choose its profit- maximizing output level in the market. The inverse demand function for boxes is P = 1,200 - 6Q, CompositeBox’s costs are CC(QC) = 60QC, and Fiberboard’s costs are CF (QF) = 120QF. Ignoring antitrust considerations, would it be profitable for your firm to merge with Fiberboard? If not, explain why not; if so, put together an offer that would permit you to profitably complete the merger.

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  • CreatedApril 18, 2014
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