Question 1. Consider the attached graph. Suppose that Sony Company and American Company jointly form a new firm, Venture Company, whose ball bearings replace the output sold by the parents in the domestic market. Assuming that Venture Company operates as a monopoly and that its costs equal MC0=AC0, what would be the firm's price, output, and total profit ?
Question 2. Consider the attached graph. Assume Venture Company's formation yields new cost reductions, indicated by MC1=AC1, which result from technological advances. Realizing that Venture Company results in a deadweight loss of consumer surplus, what is the net effect of Venture Company's formation on the welfare of the domestic economy?