Business, 23.04.2020 18:01 jeanieb

Firm A is considering acquiring firm B at which point, firm A would be a monopolist in the market. Having acquired firm B, firm A's production cost would remain CA(QA) = QA since B's production technology is inferior to A's at any scale of production. Specifically, assume that in case of acquisition, Firm A would scrap firm B's plant and avoid B's fixed cost of FB.

(a) As a monopolist, how much would firm A supply to the market?
(b) What would firm A's profits be as a monopolist?
(c) What is the aggregate surplus when A supplies the market as a monopolist?
(d) How much would firm A be willing to pay for the acquisition of firm B? Are there gains from trade?

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Firm A is considering acquiring firm B at which point, firm A would be a monopolist in the market. H...