Consider a downstream monopolist producing a final good that requires two inputs in fixed proportions. Input 1 is produced by upstream monopolist U1 and input 2 is produced by upstream monopolist U2. Suppose that the demand function for the final product is linear and the marginal costs of production for the upstream producers and final producer (other than for the two inputs) are equal to zero. What is the effect of a merger between the two upstream producers? a) The merger reduces the quantity of the final product sold to consumers and the merged firm's profits. b) The merger reduces the quantity of the final product sold to consumers and increases the merged firm's profits c) The merger increases the quantity of the final product sold to consumers and the merged firm's profits. d) The merger increases the quantity of the final product sold to consumers and decreases the merged firm's profits. e) Cannot be determined given the information provided.

Consider a downstream monopolist producing a final good that requires two inputs in fixed proportions. Input 1 is produced by upstream monopolist U1 and input 2 is produced by upstream monopolist U2. Suppose that the demand function for the final product is linear and the marginal costs of production for the upstream producers and final producer (other than for the two inputs) are equal to zero. What is the effect of a merger between the two upstream producers? a) The merger reduces the quantity of the final product sold to consumers and the merged firm's profits. b) The merger reduces the quantity of the final product sold to consumers and increases the merged firm's profits c) The merger increases the quantity of the final product sold to consumers and the merged firm's profits. d) The merger increases the quantity of the final product sold to consumers and decreases the merged firm's profits. e) Cannot be determined given the information provided.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter14: Monopoly

Section: Chapter Questions

Problem 14.2P

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