There used to be two airlines serving Kabralstan's only route, which connects the capital to the country's largest city. Airfares were set at $50 (single cabin). Each year, 5.2 million passengers flew on either of the two airlines. The variable cost of carrying one passenger was constant and equal to $10 (same for both airlines). Recently, one of the airlines was acquired by its competitor. Since then, fares increased to $80, the number of passengers dropped to 4.3 million passengers a year, and the cost of carrying one passenger increased to $20 per passenger.

(a) Making (and justifying) the assumptions and approximations you deem necessary and reasonable, estimate the variation in consumer surplus (in $ and in percent terms).

(b) Making (and justifying) the assumptions and approximations you deem necessary and reasonable, estimate separately the variation in productive efficiency and in allocative efficiency as a fraction of the initial total surplus. (c) In addition to the change in economic efficiency, what are other relevant effects of the merger of the two Kabralstan airlines (open question)?