A Cournot industry has the inverse demand function p = 6000 - Y, where Y is the output

industry total. The marginal cost of production is 70. Initially, the industry is composed

of 40 identical firms. For this question you can use the general formulas of the model

de Cournot data in the course.

a) Calculate the profit of each firm at Cournot's equilibrium.

b) 35 firms would like to merge together and form a single firm. The other firms

would continue to be active. Calculate the profit of each firm if this merger takes place.

c) Is this merger profitable for the merging firms? Is it profitable for firms

who do not participate in the merger? Prove your answers.

d) Should the government approve this merger? Why (no need to do calculations

here)?