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ssume that if two firms merge, the mergedfirm will be able to act as an industry leader,making its output decision before the non-merged firms make
ssume that if two firms merge, the mergedfirm will be able to act as an industry leader,making its output decision before the non-merged firms make theirs. Further assumethat=0 so that the firms are of equalefficiency.a. Confirm that a merger between firms1 and 2 will now be profitable. Whathas happened to the profits of the non-merged firms and to the product priceas a result of this merger?b. Confirm that the two remaining firmswill also want to merge and join theleader group given that the leaders actas Cournot competitors with respect toeach other (hint: this merger will cre-ate a leader group containing two firmsand a follower group containing none).What does this second merger do to themarket price
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