Problem 1: Antitrust Analysis of a League Merger. Demand for outdoor lacrosse teams in the United States is given by:

P (Q) = 240 2Q where Q is the total number of lacrosse teams and P is the average revenue generated from

the last team. Starting a new team has a constant marginal cost MC = 180

Suppose that the two lacrosse leagues merge into one monopoly league. The merger generates an increase in demand through a switch to a tour-based model (as opposed to a hometown-based model), so demand for lacrosse games increases to

P (Q) = 248 2Q The merger allows the single league to consolidate talent and hence decreases the

marginal cost to MC = 176.

a) Find the market price and the market quantity.

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

c) If the antitrust authority only cares about total surplus, will they allow or block the merger?