An industry consists of two firms. These two firms agree to merge with each other, but the merger is subject to review by the Competition Bureau of Canada. An analyst at the Bureau calculates that the Gross upward pricing pressure index (GUPPI) equals (-0.20) for product 1 (produced by firm 1), and equals (-0.50) for product 2 (produced by firm 2).

Based on this information, should the Bureau allow the merger to go ahead? Why or why not?

A:Yes the merger should be allowed: the increase in producer surplus from the merger outweighs the reduction in consumer surplus.

B:Yes the merger should be allowed: both consumer and producer surplus increase as a result of the merger.

C:No the merger should not be allowed: both consumer and producer surplus decrease as a result of the merger.

D:No the merger should be allowed: the reduction in consumer surplus from the merger outweights the increase in producer surplus.