Math Practice for Economics Calculating the Monetary Effects of Mergers Different types of mergers can have different effects on the bottom-line profitability of a company. For example, horizontal mergers result in less competition and may lessen the amount a company needs to spend on advertising. Vertical mergers, on the other hand, may result in economies of scale that can lower the cost of production. Directions: Use the table to compare profit scenarios. Then answer the question that follows. Step 1: Calculate your company's profit. Assume that your business is a retailer that sells a variety of outdoor equipment. Last year, your total yearly sales were $2.6 million. You broke down your operating costs for the year into several categories. Using the table below, which shows your revenue and operating expenses, calculate your company's profit for the year. Single Company Revenue $2,600,000 Costs: Staff Salaries $180,000 Cost of Goods Sold $1,400,000 Advertising $60,000 Overhead $25,000 Miscellaneous Expenses $20,000 Total Costs Profit Step 2: Compare revenue and operating expenses against proposed merger offers. This year, your business received two competing merger offers. One is from a competitor that also sells outdoor equipment. Another is from a tent manufacturer whose products you carry. Each option would have a different effect on your company's revenue and costs. Using the table below, determine how these mergers would affect the revenue, costs, and profits of your business