What happens to market output

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Question: (Requires calculus) Three Cournot oligopolists, all with constant and identical marginal costs of $5, serve a market with demand Q = 15 - P. Calculate their equilibrium output and show that it is three-fourths of the perfectly competitive level. Also show that it is 50 percent above the monopoly level. Two of them now consider merging. If they merge they can better coordinate operations, and their marginal costs will fall to $2 at all outputs. What happens to market output? To the profit of the nonmerging firm? To the profit of the merged firm? Does this outcome seem odd to you?

Reference no: EM132123868

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