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The graph below is intended to repre- sent the welfare effect of a merger in which prices change from a premerger competitive price p, to a postmerger price pm, where both firms charged the same price premerger and were profitable and where both firms faced marginal costs c, before the merger

The graph below is intended to repre- sent the welfare effect of a merger in which prices change from a premerger competitive price p, to a postmerger price pm, where both firms charged the same price premerger and were profitable and where both firms faced marginal costs c, before the merger

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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3. The graph below is intended to repre- sent the welfare effect of a merger in which prices change from a premerger competitive price p. to a postmerger price pm, where both firms charged the same price premerger and were profitable and where both firms faced marginal costs c. before the merger which went down to cm after the merger. (a) Insert the labels pc, Pm, qc, qm at the right places in the graph. (b) Label the demand curve in the graph. (c) For each of the fifteen regions be- tween the axes and the demand curve, indicate how the merger changed who got what. For in- stance, write P → N to mean that producers had the area before the merger and no one has it after. (d) What is deadweight loss in this graph if fixed osts do not change?
Transcribed Image Text:3. The graph below is intended to repre- sent the welfare effect of a merger in which prices change from a premerger competitive price p. to a postmerger price pm, where both firms charged the same price premerger and were profitable and where both firms faced marginal costs c. before the merger which went down to cm after the merger. (a) Insert the labels pc, Pm, qc, qm at the right places in the graph. (b) Label the demand curve in the graph. (c) For each of the fifteen regions be- tween the axes and the demand curve, indicate how the merger changed who got what. For in- stance, write P → N to mean that producers had the area before the merger and no one has it after. (d) What is deadweight loss in this graph if fixed osts do not change?
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