2) Consider the following potential merger. Firm A sells its product for $100 and has marginal cost of $60 and sells a quantity of 100 units. Firm B sells its product for $80 and has marginal cost of $40 and sells a
quantity of 100 units. Cross price elasticity is 0.5. Calculate the value of diverted sales expected if these
firms merge. What is the GUPPI? Is this merger likely to receive additional scrutiny for potential
unilateral effects? If the merger is likely to generate efficiencies, give an example of potential cost
savings significant enough to alleviate concerns of unilateral price effect. (10 possible points)