A Cournot oligopoly consists of four firms, each with a marginal cost of production of MC=10....

A Cournot oligopoly consists of four firms, each with a marginal cost of production of MC=10. The market demand curve is given by Q=(100-P)/3 . The four firms are looking to merge into a single firm so they can increase their profit margin by taking advantage of scale economies. Suppose that after the merger, market demand remains the same but the marginal cost of production of the merged firm decreases to MC=4.

26. What is the change in net social welfare resulting from the merger?

A. -$144

B. $2,500

C. -$850

D. $380

E. $0

Expert Solution

Rahul Sunny answered 8 months ago

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