1. Two hospitals want to merge. The price elasticity of demand is -0.20, and each clinic has fixed costs of $100,000. One clinic has a volume of 9,200, marginal costs of $70, and a market share of 3 percent. The other clinic has a volume of 15,800, marginal costs of $80, and a market share of 6 percent. The merged firm would have a volume of 18,000, fixed costs of $80,000, marginal costs of $60, and a market share of 6 percent.

What are the total costs, revenues, and profits for each clinic and the merged firm?.

How does the merger affect markups and profits?

2. Explain your understanding of this notion: “Misunderstanding the dangers of risky behavior and the likelihood of those dangers is a major problem for younger people” as it relates to aversion. What happens as we get older?.