ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Suppose the European Union (EU) is investigating a proposed merger between two of largest distillers of premium Scotch liquor. Based on estimates from the EU’s economists, these two firms have a combined market share of about two-thirds of all sales in the relevant market. The only remaining firm controls the other one-third of the market. Economists have estimated that the wholesale market price elasticity of demand for Scotch is −1.3 and the unit cost to produce and distribute the Scotch is 16.20 per liter. 

 

  1. Using the available information, provide quantitative estimates of the pre- and post-merger prices for Scotch in the wholesale market.
  2. In your opinion, is the EU’s concern about the merger justified? Why or Why not?
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