To examine the trade-off between market efficiency and market power from a merger, consider a market with two firms that sell identical products. Firm 1 has a constant marginal cost of $, and Firm 2 has a constant marginal cost of $2. The market demand is Qp= 105-p.

Note that

dπ1/∂q1= [105-1(q1+q2)]- 1q1-1=0

dπ2/∂q2= [105-1(q1+q2)]- 1q1-2=0

The Cournot-Nash equilibrium occurs where q1 = 15.00 and q= 12.00. Market output is 69. Futhermore , the equilibrium occurs at a price of $--