Problem 1: League Merger. Suppose there are only two soccer leagnes in Europe: Bundesliga (B) and La Liga (L). Let qB and qL represent the number of teams produced each league, respectively. Demand for Bundesliga soccer teams is given by PB=3003qB2qL and demand for La Liga soccer teams is symmetric and given by PL=3003qL2qB Starting a new team has a constant marginal cost MC=60. 1. Suppose that the leagues engage in Cournot competition by simultaneously choosing the number of teams qB and qL. a) Find the Bundesliga's best response function. b) Find the Nash equilibrium number of teams produced by each league. c) Find the price for each league. d) Find total profits of both leagues combined. 2. Suppose that the two leagues merge into a single monopoly league (Euro League). The post-merger demand is given by P(Q)=3002Q where Q is the total number of soccer teams produced by Euro League. Starting a new team still costs MC=60. a) Find the price and the total number of teams produced by the league. b) Find total profits and consumer surplus in the market. c) The pre-merger consumer surplus in part 1 is CS=2700. Will the antitrust authority block or allow the merger? Briefly justify your answer. Problem 1: League Merger. Suppose there are only two soccer leagnes in Europe: Bundesliga (B) and La Liga (L). Let qB and qL represent the number of teams produced each league, respectively. Demand for Bundesliga soccer teams is given by PB=3003qB2qL and demand for La Liga soccer teams is symmetric and given by PL=3003qL2qB Starting a new team has a constant marginal cost MC=60. 1. Suppose that the leagues engage in Cournot competition by simultaneously choosing the number of teams qB and qL. a) Find the Bundesliga's best response function. b) Find the Nash equilibrium number of teams produced by each league. c) Find the price for each league. d) Find total profits of both leagues combined. 2. Suppose that the two leagues merge into a single monopoly league (Euro League). The post-merger demand is given by P(Q)=3002Q where Q is the total number of soccer teams produced by Euro League. Starting a new team still costs MC=60. a) Find the price and the total number of teams produced by the league. b) Find total profits and consumer surplus in the market. c) The pre-merger consumer surplus in part 1 is CS=2700. Will the antitrust authority block or allow the merger? Briefly justify your