Question 1
At the level of the industry, the condition for productive efficiency is that
◦ MC = P for all goods.
◦ MC is equal for all firms in the industry.
◦ MRP = P for all inputs.
◦ goods are allocated equitably.
◦ there are no idle resources in the industry.
Question 2
Suppose there are
only two firms (Firms A and B) in Canada that produce good X, and the two firms propose a merger to create a single firm (Firm AB). Is there any circumstance under which the authorities enforcing Canadian competition policy might approve of such a merger?
◦ According to the
Competition Act, as long as the revenues of the merged firm are less than $100 million per year.
◦ If the market is defined as being within Canada's borders, and the merger allows Firm AB to exploit economies of scale.
◦ If international trade in good X is such that Firm AB faces a fully competitive environment, both within and outside of Canada's borders.
◦ According to the
Competition Act, if the merged firm enhances the status of a Canadian cultural industry.
Canada lynx
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