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Unformatted text preview: n identical firms in a market belong to a cartel, how much total output will be produced relative to the monopoly output, and how much will each firm produce? 5. Can the combined profits of oligopolistic firms ever be higher than those of a monopoly with the same costs as those of the firms combined? 6. An industry consists of three firms with identical costs (±) ² ³´± µ ± ¶ . Market demand is ·(¸) ² ³¹º » ¸¼ . a. What is the industry equilibrium (price, output and profits) if the firms have Cournot beliefs? b. Would it pay for Firm 1 and Firm 2 to merge, if, after the merger, the remaining firm plays Cournot? ( Hint : carefully consider if the merged firm would produce using both original firms’ plants or just those of one firm.)...
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This note was uploaded on 12/15/2011 for the course EES 108 taught by Professor Giligan during the Spring '11 term at Vanderbilt.
- Spring '11