Final answer:
In Cournot competition between two firms with differing marginal costs, equilibrium values can be computed by setting marginal revenue equal to marginal cost for each firm. After merging, if the firms operate as a monopoly, they would likely gain higher profits but would also create a higher deadweight loss and reduced welfare due to higher prices and lower output.
Step-by-step explanation:
In a market with two firms (Firm 1 and Firm 2) engaging in Cournot competition and selling identical products, where Firm 1 has a constant marginal cost of 1 and Firm 2 has a constant marginal cost of 2, and market demand is represented by D(p)=15−p, the equilibrium outputs, profits, market price, consumer surplus, and deadweight loss can be determined through strategic decision-making models. Firm 1 will choose its quantity based on maximizing profit where its marginal revenue equals its marginal cost (MR=MC), and similarly for Firm 2. If these firms merge and produce at the lower marginal cost, they effectively become a single firm facing a horizontal average cost curve, which implies that profits at every output level would increase.
After the merger, assuming they act as a monopoly, they would set quantity where MR=MC, leading to a higher market price and the potential for increased economic profits, but this would also likely result in a decrease in consumer surplus and an increase in deadweight loss due to reduced output compared to the competitive scenario. These changes reflect the changes in efficiency, welfare, and deadweight loss.