1. There are three profit-maximising firms that compete in prices. Each firm i = 1, 2, 3 produces good i and faces the d

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1 There Are Three Profit Maximising Firms That Compete In Prices Each Firm I 1 2 3 Produces Good I And Faces The D 1 (92.89 KiB) Viewed 22 times

1. There are three profit-maximising firms that compete in prices. Each firm i = 1, 2, 3 produces good i and faces the demand function qi = 12 – 3pi+Dji Pj. For each firm i, the cost of producing a quantity q is ciq, where c1 = 2, C2 = 4, and c3 = 6. (a) Find the equilibrium prices and quantities. (b) Suppose that firms 2 and 3 merge to become firm A and that their merger results in efficiency gains that halve the cost of producing goods 2 and 3; that is, c2 = 2 and c3 = 3. Calculate the new equilibrium prices and quantities. (c) How much profit did the merger generate for the firms involved? (d) i. Did the outsider (firm 1) benefit from the merger? ii. Provide intuition for your result in (i). (max: 50 words) (e) Without doing any additional calculations, determine whether a competition au- thority would be likely to block this merger. (max: 50 words]