Answer to Question #117288 in Microeconomics for Mia

Question

Suppose that the long-distance market is a monopoly following the merger between AT&T and Sprint and that x = 5/4. Assume that s remains constant at 12. Should the DOJ allow this merger to proceed? Provide a careful economic analysis in support of your recommendation

Answer 1

The DOJ should allow the merge. Since the market is a monopoly, all the companies involved will have to come to an agreement to not only pricing but also factors that surround the market. At a constant of 12, the consumers will not be exploited since AT&T and Sprint will be the determinants of pricing.