1.Firms in the widget industry compete under the conditions assumed in the“pure” Bertrand model: the firm charging the lowest price gets all themarket demand. Assume that each firm has a 10...

1.Firms in the widget industry compete under the conditions assumed in the“pure” Bertrand model: the firm charging the lowest price gets all themarket demand. Assume that each firm has a 10 percent discount rate overfuture dollars. You do not know if widget sellers are colluding.a.Assume that there are 12 firms, and3 that after the merger there will be11. Under a Coordinated Effects theory, do you challenge this merger?b.Suppose that there are 10 firms and will be 9 after the merger. Under ACoordinated Effects theory, do you challenge it?c.Same question if there are 8 firms and will be 7 after the merger.2.Which (if any) of the following are cognizable effects of a merger?a.After the merger, the merged firm will reduce costs by adopting bestpractices.b.After the merger, the merged firm will shut down duplicate facilities.c.Input suppliers sell a critical input to widget sellers and give quantitydiscounts. After the merger, the combined orders of the two firms willbe given to one input supplier, yielding bigger discounts on the price ofthe input.d.After the merger, the new firm can reduce rental rates on floor space.