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Consider a case of bilateral monopoly in which demand for the final good is P =100Q. The average and marginal cost of producing the monopolized

Consider a case of bilateral monopoly in which demand for the final good is

P =100Q.

The average and marginal cost of producing the monopolized input is LRAC=LRMC=20.

a. What is a bilateral monopoly and how does it relate to the problem of double marginalization?

b. Calculate the total gain in consumer plus producer surplus if the two monopolists merged.

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