Consider a market with only two producers, each with constant marginal cost: MC1 = 20, MC2 = 50. Market demand is Q = 400 – P. (Ignore fixed costs at the beginning.) A. Basic cases a. If the two firms compete as Cournot oligopolists, find their reaction functions and solve for the Cournot equilibrium quantities and price. b. Suppose Firm 1 tries to acquire Firm 2, arguing that the joint venture will be able to streamline certain processes and lower costs. A top management consulting firm has even produced a report which shows that marginal cost will indeed be lowered to only MC = 10. Assuming this is accurate, do you think government regulators should allow the merger to proceed? Explain your reasoning.

Consider a market with only two producers, each with constant marginal cost: MC1 = 20, MC2 = 50. Market demand is Q = 400 – P. (Ignore fixed costs at the beginning.) A. Basic cases a. If the two firms compete as Cournot oligopolists, find their reaction functions and solve for the Cournot equilibrium quantities and price. b. Suppose Firm 1 tries to acquire Firm 2, arguing that the joint venture will be able to streamline certain processes and lower costs. A top management consulting firm has even produced a report which shows that marginal cost will indeed be lowered to only MC = 10. Assuming this is accurate, do you think government regulators should allow the merger to proceed? Explain your reasoning.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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