Homework answers / question archive / Two physical therapy firms want to merge, The price elasticity of demand for physical therapy is –0

Two physical therapy firms want to merge, The price elasticity of demand for physical therapy is –0

Economics

Share With

Two physical therapy firms want to merge, The price elasticity of demand for physical therapy is –0.40. APT has a volume (Q) of 10,400, fixed costs (FC) of $50,000, marginal costs (MC) of $20, and a market share of 8 percent. BPT has a volume of 15,600, fixed costs of $60,000, marginal costs of $20, and a market share of 12 percent. The merged firm has a volume of 26,000, fixed costs of $100,000, marginal costs of $20, and a market share of 20 percent.

a. What are the total costs (TC), prices, revenues, and profits for each firm and for the merged firm?

b. How does the merger affect markups and profits?