Suppose an industry with four firms 1) having the same constant marginal cost c₁ = C₂ = C3 = C4 = 4; 2) incurring no fixed cost of production; 3) producing a homogeneous good and choosing output simultaneously (i.e., being Cournot competitors); and 4) facing the linear inverse demand P = 10-Q with Q 91 +92 +93 +94. = Q9) Determine the quantity produced by firms 1 and 2 at the pre-merger equilibrium. Assume firm 1 merges with firm 4 and retains the name firm 1 leaving in the market firms 1, 2, and 3. The merger leads to synergies with the marginal cost of the merged firm becoming c₁ < 4. Q10) Determine the quantity produced by firms 1 and 2 at the the post- merger equilibrium (each firm's quantity will be a function of c₁). Q11) Determine the value for c₁ such that the merger becomes profitable. Q12) Determine the value for ₁ such that the price decreases post-merger.
