Purchase Solution

Economics of a Merger

Not what you're looking for?

Ask Custom Question

Consider a market that is initially served by two firms, each of which charges a price of $10 and sells 100 units of the good. The long-run average cost of production is constant at $9 per unit. Suppose a merger will increase the price to $14 and reduce the total quantity sold from 200 to 150.

A. COMPUTE -- What is the consumer surplus [loss] associated with the merger.

B. COMPUTE -- What was the profit before the merger? after? increase?

C. How does the consumer loss compare to the increase in profit?

D. COMPUTE --- What is the net loss from the merger to SOCIETY?

Purchase this Solution

Solution Summary

The solution explains the different economics behind a merger using the questions below.

Solution Preview

A)
The loss in consumer surplus can be calculated as follows:
4x150 + 0.5x4x50
= 600 + 100
= ...

Purchase this Solution


Free BrainMass Quizzes
Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.