Assume the following facts concerning the horizontal merger model developed by Oliver Williamson. Assume that demand is P=120–2QP=120-2Q, where P and Q refer to price and output, respectively. The post-merger market structure is a monopoly. The pre-merger total cost function is TC = 50Q and the post merger total cost function is TC = 40Q. a. Based on this information, determine the value of the efficiency gains due to the merger. b. Based on this information, determine the value of the deadweight loss due to the merger. c. Should the Department of Justice accept or deny the merger?

Assume the following facts concerning the horizontal merger model developed by Oliver Williamson. Assume that demand is P=120–2QP=120-2Q, where P and Q refer to price and output, respectively. The post-merger market structure is a monopoly. The pre-merger total cost function is TC = 50Q and the post merger total cost function is TC = 40Q. a. Based on this information, determine the value of the efficiency gains due to the merger. b. Based on this information, determine the value of the deadweight loss due to the merger. c. Should the Department of Justice accept or deny the merger?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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