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Net Loss From A Merger

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Consider a market that is initially served by two firms, each of which charges a price of $16 and sells 100 units of the good. The long-run average cost of production is constant at $15 per unit. Suppose a merger will increase the price to $20 and reduce the total quantity sold from 200 to 150.

A. What is the consumer surplus [loss] associated with the merger.
B. What was the profit before the merger? after? increase?
C. How does the consumer loss compare to the increase in profit?
D. What is the net loss from the merger to society?

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Solution Preview

A. Consumer loss associated with the merger = ...

Solution Summary

Net loss from the merger is determined.

$2.19