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

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

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter15: Oligopoly And Strategic Behavior

Section: Chapter Questions

Problem 12P

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