If the firms in a Cournot duopoly merge forming a monopoly, the effect on price, profit, and other variables depends on the trade-off between efficiency and market power. The firms produce identical products. Firm 1 has a constant marginal cost of $1, and Firm 2 has a constant marginal cost of $2. The market demand is Q-15-p. The Cournot-Nash equilibrium occurs where equals and q₂ equals. (Enter numeric responses using real numbers rounded to two decimal places.) Furthermore, the equilibrium occurs at a price of $ Firm 1 receives profit of $ and Firm 2 receives profit of $. Consumer surplus equals S If the firms merge and produce at the lower marginal cost, then the new equilibrium occurs where market output (Q) is. The new equilibrium price is $ The merged firm's profit is $. Consumer surplus is now $
If the firms in a Cournot duopoly merge forming a monopoly, the effect on price, profit, and other variables depends on the trade-off between efficiency and market power. The firms produce identical products. Firm 1 has a constant marginal cost of $1, and Firm 2 has a constant marginal cost of $2. The market demand is Q-15-p. The Cournot-Nash equilibrium occurs where equals and q₂ equals. (Enter numeric responses using real numbers rounded to two decimal places.) Furthermore, the equilibrium occurs at a price of $ Firm 1 receives profit of $ and Firm 2 receives profit of $. Consumer surplus equals S If the firms merge and produce at the lower marginal cost, then the new equilibrium occurs where market output (Q) is. The new equilibrium price is $ The merged firm's profit is $. Consumer surplus is now $
Chapter15: Imperfect Competition
Section: Chapter Questions
Problem 15.4P
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Transcribed Image Text:If the firms in a Cournot duopoly merge forming a monopoly, the effect on price, profit, and other variables depends on the trade-off between efficiency and market power. The firms produce identical products. Firm 1 has a constant marginal cost of $1, and Firm 2 has a constant marginal cost of $2. The market demand is
Q=15-p.
The Cournot-Nash equilibrium occurs where q₁ equals
Furthermore, the equilibrium occurs at a price of $.
Firm 1 receives profit of $
and Firm 2 receives profit of $
and q₂ equals (Enter numeric responses using real numbers rounded to two decimal places.)
Consumer surplus equals $
If the firms merge and produce at the lower marginal cost, then the new equilibrium occurs where market output (Q) is
The new equilibrium price is $
The merged firm's profit is $
Consumer surplus is now $
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