[4 marks] 10. An industry contains two firms, A and B. Demand for the industry's product is given by: P = 500 - 50. Firm A has fixed costs of f1 500 and firm B has fixed costs of $900. The marginal costs of the two firms are constant: that of firm A is $50 and that of firm B is E80. (a) Calculate the Stackelberg equilibrium (assuming firm A is the leader) for this industry, showing the equilibrium market price, and the output and profits for each firm. [12 marks] (b)(i) What economic incentives are there for firms A and B to merge together to form a single monopoly? [2 marks] (ii) Assuming that the two firms merge and produce all of the output from the factory of firm A, mothballing the factory of firm B, determine the additional profit the newly merged firm would make. [6 marks]