Two physical therapy firms want to merge. The price elasticity of demand for physical therapy is… 1 answer below »

Two physical therapy firms want to merge. The price elasticity of demand for physical therapy is -0.40. Firm A has a volume of 10,400, fixed costs of $50,000, marginal costs of $20, and a market share of 8%. Firm B has a volume of 15,600, fixed costs of $60,000, marginal costs of $20, and a market share of 12%. The merged firm has a volume of 26,000, fixed costs of $100,000, marginal costs of $20, and a market share of 20%.

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a. What are the total costs, prices, revenues, and profits for each firm and for he merged firm?

b. How does the merger affect markups and profits?