[d] Suppose that prior to the merger, the rms are engaged in W What are equilibrium quantities and prices? [e] If Firms 1 and 2 Q}; what will be the new equilibrium price W? [Q Does consumer surplus increase or decrease following the Wabout industry prots? [g] Given your answers to the preceding question, should the merger assumed? 4. In 2014, the boards of AT&T and DirecTV agreed to a $48.5 billion merger. You have been tasked with evaluating the merger. Here are some basic facts about the companies: AT&T is the second-largest US telecom company. AT&T offers wireline video, broadband, and phone service in 22 states and wireless phone service nationwide. AT&T U-Verse's TV service has about 5.7 million customers in 22 states. DirecTV is the second-largest W provider in the US [after Comcast], with 22 million pay TV subscribers. Consumer groups have raised concerns that the merger will raise W prices. AT&T and DirecTV argued that the merger will lead to cost savings. Consider the following model to help you think through these issues: Let j denote a rm, where j E {1,2}. [Think of AT&T as firm 1 and DirecTV as firm 2). They face a symmetric demand function: MILE-j] = 66 5pj+ 2333:. Each rm has a marginal cost of c = 6. [3) Suppose that prior to the merger, the rms are engaged in W What are equilibrium quantities and prices? (b) If Firms 1 and 2 m what will be the new equilibrium price angquantjty? [c] Suppose that following the merger, the marginal cost decreases from to c\". How much does the new marginal cost (:0 need to be so that the post-merger price equals the pre-merger price? Complements: After you submit your analysis using the above model, AT&T and DirecTV point out that AT&T also provides broadband services, which is a complement to DirecTV's video services: many consumers want both broadband and video services. Thus, the demand function should really be written as: m4] = 66 5pj 233.}. Each firm has a marginal cost of c = 6