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If the firms in a Cournot duopoly merge forming a monopoly, the effect on price, profit, and other variables depends on the trade-off between efficiency
If the firms in a Cournot duopoly merge forming a monopoly, the effect on price, profit, and other variables depends on the trade-off between efficiency and market power. The firms produce identical products. Firm 1 has a constant marginal cost of $1, and Firm 2 has a constant marginal cost of $2. The market demand is Q =45-p. The Cournot-Nash equilibrium occurs where q, equals and q2 equals . (Enter numeric responses using real numbers rounded to two decimal places.) Furthermore, the equilibrium occurs at a price of $] Firm 1 receives profit of $ and Firm 2 receives profit of $ Consumer surplus equals $ If the firms merge and produce at the lower marginal cost, then the new equilibrium occurs where market output (Q) is The new equilibrium price is $ The merged firm's profit is $ Consumer surplus is now $
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