Question: Consider an industry with demand Q = 80 - p where 7 identical firms that compete in quantities (i.e., the Cournot model describes their behaviour).

Consider an industry with demand Q = 80 - p where 7 identical firms that compete in quantities (i.e., the Cournot model describes their behaviour). Each firm's cost function is given by C = 13 + 4 q. Suppose two of the firms merge and that the merged firm's cost function is given by C' = 16 + 4 q. What is the expected percentage change in price due to the merger?

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