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You are the CEO of ClipIt, a paper clip manufacturer. Your company enjoys a patented process...

You are the CEO of ClipIt, a paper clip manufacturer. Your company enjoys a patented process that allows it to produce paper clips faster and at a lower cost than your only rival, FastenIt, even though you use the same machinery in your factories. Clipit uses this advantage to be the first to choose its profit-maximizing output level in the market. The inverse demand function for paper clips is P=496 - 2(Q1+Q2), ClipIt’s costs are CC(QC)=2QC, and FastenIt’s costs are CF(QF)=4QF

1. What is ClipIt’s profit-maximizing output level?

2. What is FastenIt’s profit-maximizing output level?

3. What is the market’s equilibrium price?

4. How much profit does each firm earn?

5. Given the demand and cost functions and ignoring antitrust considerations, if ClipIt were to acquire FastenIt, what would be the profit of the combined firm? (Don't worry about the purchase price of the acquisition)

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