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A Cournot oligopoly consists of four firms, each with a marginal cost of production of MC=10....

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Economics

A Cournot oligopoly consists of four firms, each with a marginalcost of production of MC=10. The market demand curve is given byQ=(100-P)/3 . The four firms are looking to merge into a singlefirm so they can increase their profit margin by taking advantageof scale economies. Suppose that after the merger, market demandremains the same but the marginal cost of production of the mergedfirm decreases to MC=4.

26. What is the change in net socialwelfare resulting from the merger?

      A. -$144

      B. $2,500

      C. -$850

      D. $380

      E.   $0

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