Answer to Question #118518 in Microeconomics for Sione Kava

Question

Continue to assume that x = 5/4, but the market for long-distance telephone service remains perfectly competitive following the merger. For what values of s will the DOJ approve this merger?

Answer 1

With the remaining stable indicators, we obtain the following expression for determining the quantitative characteristics of the quality of the services provided:

$$Q=a+s-bp$$

$$s=Q-a+bp$$

$$s=x(K+\frac{1}{2}L)-a+bp$$

$$s=1.25(K+\frac{1}{2}L)-a+bp$$