Consider an industry with two firms each selling a homogeneous good and producing at MC1 = 10 and MC2 = 40. Industry demand is given by P = 100 - Q. Competition in the market place is in quantities (Cournot competition).

(a) Find the equilibrium quantities, price and profits.

(b) Consider now a proposed merger between the two firms, resulting in a monopoly producing at MC = 10. Find the post-merger equilibrium quantities, price and profit.

(c) Would Competition Bureau approve the proposed merger or reject it? Provide an economic analysis to support your answer and illustrate it by a diagram.