There are 4 firms in a market. The inverse demand for the product is P=100-Q. All firms make identical product. The prod

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There are 4 firms in a market. The inverse demand for theproduct is P=100-Q. All firms make identical product. Theproduction costs for three firms are C(q)=20q. Assume that if twofirms merge, the merged firm will be able to act as an industryleader, making its output decision before the non-merged firms maketheirs.
a. Confirm that a merger between two firms, firm 1 and 2 will beprofitable. What has happened to the profits of the non mergedfirms and to the product price as a result of this merger?
b. Confirm that the two remaining firms also want to merge andjoin the leader group given that the leaders act as Cournotcompetitors with respect to each other. What does this secondmerger do to the market price? (hint: the merger will create aleader group containing two firms and a follower group containingnone)