Why is it reasonable to assume that the merger will decrease the elasticity of demand for each firms products?

Consider the application Heinz and Beech-Nut Battle for Second Place. Suppose the merger of two firm Show more Consider the application Heinz and Beech-Nut Battle for Second Place. Suppose the merger of two firms will reduce the price elasticity of demand for each firms product from 3.0 to 1.50. For each firm the average cost of production is constant at $5 per unit. Suppose Heinz initially has a price of $10 and is considering raising the price to $11. a. Fill in the blanks in the following table showing the payoffs from raising the price before the merger (elasticity = 3.0) and after the merger (elasticity = 1.50). b. Before the merger raising the price would_______ the firms profit. After the merger raising the price would _______the firms profit. c. Why is it reasonable to assume that the merger will decrease the elasticity of demand for each firms products? Show less

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