Two Cournot duopolists produce in a market with demand p=100-q. The marginal cos

Question

Two Cournot duopolists produce in a market with demand p=100-q. The marginal cost for Firm 1 is constant and equals 10. The marginal cost for Firm 2 is also constant and equals 25. The fixed cost is zero for both firms. The two firms want to merge. They argue for the merger on the grounds that marginal production costs would fall to 10 for all units of output after the merger since all production woul be at the low marginal cost. Given this information determine whether an antirust enforcement agency that blocks any merger that reduces Total Surplus would allow this merger. Given this information determine whether an antirust enforcement agency that blocks any merger that reduces Consumer Surplus would allow this merger (Hint: You need to determine the premerger Cournot equilibrium and the postmerger monopoly outcome. Remember that the Consumer Surpolus is equal to the area under the demand curve above the equilibrium price. the area of the righ triangle is
side1*side2/2

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Explanation / Answer

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