Suppose the European Union (EU) was investigated and proposed a merger between two of the largest distillers of premium Scotch
liquor. Based on some economists' definition of the relevant market, the two firms proposing
to merge enjoyed a combined market
share of about two-thirds, while another firm essentially controlled the remaining share of the market.
Additionally, suppose that the
(wholesale) market elasticity of demand for Scotch liquor is -1.5 and that it costs $
14.70
to
produce and distribute each liter of Scotch
.
Based only on these data, provide quantitative estimates of the likely pre- and postmerger prices in the wholesale market for premium
Scotch liquor.
Instructions: Do not round intermediate calculations. Enter your final responses rounded to the nearest penny (two decimal places).
Pre-merger price: $
Post-merger price: $