Question
The market for a standard-sized cardboard container consists of two firms:CompositeBoxandFiberboard. As the manager ofCompositeBox, you enjoy apatentedtechnology that permits your company to produce boxes
The market for a standard-sized cardboard container consists of two firms:CompositeBoxandFiberboard. As the manager ofCompositeBox, you enjoy apatentedtechnology that permits your company to produce boxes faster and at a lower cost thanFiberboard. You use this advantage to be the first to choose its profit-maximizing output level in the market. The inverse demand function for boxes isP= 1,200 6Q,CompositeBox'scosts areCC(QC) = 60QC,andFiberboard'scosts areCF(QF) = 120QF.Ignoring antitrust considerations, would it be profitable for your firm to merge withFiberboard? If not, explain why not; if so, put together an offer that would permit you to profitably complete the merger.
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