Consider a market with 3 Cournot firms producing a homogeneous product. Consumer demand is given by P = 130 – Q. Each firm's total costs are given by C = f + 10g, where f represents fixed costs. Suppose that firms 1 and 2 merge and that after the merger, the merged firm has fixed costsof af with 1 < a < 2. Under which condition is this merger profitable for the merging firms? O a. a<2- 200/S O b. None of the options given are correct Oc a<2-100/f O d. a<2-150/f Oe a<2-50/f

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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Consider a market with 3 Cournot firms producing a homogeneous product. Consumer demand is given by P = 130 - Q.
Each firm's total costs are given by C = f + 10g, where f represents fixed costs. Suppose that firms 1 and 2 merge and
that after the merger, the merged firm has fixed costsof af with 1 < a< 2. Under which condition is this merger
%3D
profitable for the merging firms?
O a. a< 2- 200/f
O b. None of the options given are correct
Oc a<2- 100/f
O d. a <2- 150/f
O e. a<2- 50/f
Transcribed Image Text:Consider a market with 3 Cournot firms producing a homogeneous product. Consumer demand is given by P = 130 - Q. Each firm's total costs are given by C = f + 10g, where f represents fixed costs. Suppose that firms 1 and 2 merge and that after the merger, the merged firm has fixed costsof af with 1 < a< 2. Under which condition is this merger %3D profitable for the merging firms? O a. a< 2- 200/f O b. None of the options given are correct Oc a<2- 100/f O d. a <2- 150/f O e. a<2- 50/f
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