Question: a. An industry is currently performing competitively with price equal to marginal cost. If demand is P = 200 Q and LRMC = LRAC

a. An industry is currently performing competitively with price equal to marginal cost. If demand is P = 200 − Q and LRMC = LRAC = 50, what are output and price?

b. If a series of mergers monopolizes the industry and results in lower costs such that LRMC = LRAC = 40, what happens to industry output and price?

c. Does this series of mergers improve welfare?

d. If the mergers reduced the monopolist’s costs to LRMC = LRAC = 20, would the mergers improve welfare?

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