Economists are often asked to help the Department of Justice evaluate the costs and benefits of mergers. This problem walks you through two rudimentary merger analyses. Consider a market where two firms engage in Cournot competition. They face inverse industry demand curve P = 25 %Q. The firms each face a marginal cost of $1. What is the equilibrium price under Cournot competition? How much does each firm produce? 9:: Smeit You have used 1 of 2 attempts Save If the two firms merge, they will act as a monopolist and set a single price p\" . Find the monopoly price and quantity. 10M= Submit You have used 1 of 2 attempts 53"\" Show answer What is the change in total surplus that results from the merger? (Use a positive number for an increase and a negative number for a decrease] Smelt You have used 0 of 2 attempts Save Problem P8134 3 points possible [graded] Based on your calculation, would you recommend permitting the merger to proceed? O The merger causes no change in social welfare 0 The merger should be prohibited (Le. not permitted) 0 The merger should be permitted What if each firm operating in this market incurred a fixed cost of $100? (Assume that the fixed cost is relevant to producer surplus} O The merger should be prohibited (i.e. not permitted) 0 The merger should be permitted 0 The merger causes no change in social welfare What if firms didn't compete in the Cournot model] but in the Bertrand model? (Don't account for fixed costs.) 0 The merger causes no change in social welfare O The merger should be permitted 0 The merger should be prohibited (Le. not permitted)