Answer to Question #174722 in Microeconomics for jasmine

Question

“Government should regulate mergers between firms” Give reason in favor and against this statement. (4.75)

b. Draw the diagram with demand and supply curves for an importing country. What is the consumer surplus and producer surplus before trade is allowed? What will be the consumer and producer surplus with free trade? Explain the change in total surplus.

Answer 1

I) Mergers affect the industry because the market reaches the whole nation. Mergers are blocked from their activities in order to continue competition and reduce monopoly.

ii) By managing mergers companies are not able to share information and resources and expand strengths of the company.

b)

 

 

Consumer and producer surplus before trade is low while consumer and producer surplus with free trade is high.

 

The change in total surplus is as a result of free trade which increases the willingness to pay for a good due to changes in prices