3.1 Req uired steps When completing the industry analysis you should assume that rms are engaged in Cournot Competition . Steps 1 to 4 apply to the market in the absence of a merger. Step 1: Using the information provided in the scenario, derive a profit function for a typical firm in the industry. Use GA to denote the quantity produced by this firm, and X to denote the combined production of the remaining two firms. (6 marks) Step 2: Derive the bestresponse function for the typical firm. (5 marks) Step 3: Find the equilibrium quantity for the typical firm, the equilibrium market quantity, and the equilibrium market price. (7 marks) Step 4: Find the equilibrium profit for the typical firm and the equilibrium consumer sur plus. (5 marks) When writing your brief you should assume that steps 3 and 4 describe the existing equi- librium in the market. Now suppose that the merger takes place and that the merged firm achieves the expected efciencies .(Note that Aggregate |nc.'s costs are not be affected by the merger .) Step 5: Find the new equilibrium quantities and price for the market. Use 0A to denote the quantity produced by Aggregate Inc.. and Q3 to denote the quantity produced by the merged firm. BigCon. (18 marks) Step 6: Find the new equilibrium firm profits and consumer surplus. (8 marks) When writing your brief steps 5 and 6 represent your assessment of the likely market conditions if the merger is permitted to proceed