a) Compare the initial sum of profits of the two individual firms, p1 + p2, with the profits of the merged firm, pA. Explain and comment.
b) If the merged firm were able to exploit economies of scale it would affect costs, may be even marginal costs. Assume the marginal cost of the merged firm was not 40, but 30. Is the merger profitable in this case?
c) Can you say something about how low the merged firm's MC need to be for the merger to become profitable?
d) Relate this to a real-world merger. Are they usually profitable? Give examples