Consider a market for a homogeneous good with a demand curve P = 100 − Q....

Consider a market for a homogeneous good with a demand curve P = 100 − Q. Initially, there are three firms in the market. All of them have constant marginal costs and incur no fixed costs. The marginal cost for firms 1 and 2 is 20, while the marginal cost for firm 3 is 40. Assume now that firms 2 and 3 merge.

a. Calculate the post-merger Cournot equilibrium quantities.
b. Calculate the post-merger Cournot market quantity and price.
c. Calculate the post-merger firm profits.
d. Calculate the post-merger HHI.
e. Calculate the post-merger market-wide Lerner index.
f. Calculate the post-merger consumer surplus.
g. Calculate the post-merger total surplus (firm profits plus consumer surplus)

Expert Solution

Rahul Sunny answered 7 months ago

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