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?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter15: Imperfect Competition

Section: Chapter Questions

Problem 15.6P

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