Revenues and profits for each clinic and the merged firm

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Two clinics want to merge. The price elasticity of demand is -0.20, and each clinic has fixed costs of $60,000. One clinic has a volume of 7,200, marginal costs of $60, and a market share of 2 percent. The other clinic has a volume of 10,800, marginal costs of $60, and a market share of 4 percent. The merged firm would have a volume of 18,000, fixed costs of $80,000, marginal costs of $60, and a market share of 6 percent.

1. What are the total costs, revenues, and profits for each clinic and the merged firm?

2. How does the merger affect markups and profits?

Reference no: EM13984736

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