Suppose that the only two firms in an industry face the market (inverse) demand curve

p=160Q.

Each has constant marginal cost equal to 10

and no fixed costs. Initially the two firms compete as Cournot rivals (Chapter 11) and each produces an output of 50

.

Why might these firms want to merge to form a monopoly? What reason would antitrust authorities have for opposing the merger?

(Hint:

Calculate price, profits, and total surplus before and after the merger.)Part 2The firms would favor the merger because combined profit would increase by $______

and the profit-maximizing price would increase by $_______

(Enter your response rounded to two decimal places.)Part 3Antitrust regulators would oppose the merger because consumer surplus would decrease by

$. ______ enter your response here

and total surplus would decrease by

$. _______ enter your response here.

(Enter your response rounded to two decimal places.)