Two physical therapy firms want to merge. The price elasticity of demand for physical therapy is 0.40. APT Firm A has a volume (Q) of 10,400, fixed costs (FC) of $50,000, marginal costs (MC) of $20, and a market share of 8 percent. BPT Firm B has a volume of 15,600, fixed costs of $60,000, marginal costs of $20, and a market share of 12 percent. The merged firm has a volume of 26,000, fixed costs of $100,000, marginal costs of $20, and a market share of 20 percent.

2. How does the merger affect markups and profits?