Calculating the benefits and costs from the merger

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Two Cournot duopolists produce in a market with demand P = 100 − Q. The marginal cost for firm 1 is constant and equals 10. The marginal cost for firm 2 is also constant and it equals 25. The two firms want to merge. They argue for the merger on the grounds that marginal production costs would fall to 10 for all units of output after the merger since all production would be at the low marginal cost. Given this information, would you recommend the merger? Explain by calculating the benefits and costs from the merger.

Reference no: EM131099740

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