Demand for professional soccerteams in Europe is given byP(Q) = 513Q whereQis the total number of soccer teams andPis the average revenue generated from the last team.Starting a new team has a constant marginal costM C= 24.1.Suppose that Bundesliga (B) and La Liga (L) are the only two soccer leagues in Europe,and they engage in Cournot competition by each simultaneously choosing to produce acertain number of teams,qBandqL.The market quantity is thus given byQ=qB+qL.

a)Find each league's best response function.

b)Find the Nash equilibrium number of teams produced by each league

c)Find the market price and the market quantity.

d)Find total profits in the market, consumer surplus, and deadweight loss.

2.Suppose that Bundesliga and La Liga merge into one monopoly league.The mergercreates an improvement in cost efficiency, so the constant marginal cost of the monopolyleague decreases toM C= 15.Demand is unchanged.

a)Find the market price and the market quantity.

b)Find total profits in the market, consumer surplus, and deadweight loss.

c)If the antitrust authority wants to maximize total surplus (consumer surplus +profits), will they allow or block the merger?