Icarus Medical Supplies produces patented adhesives that are used to reassemble broken bones. Pindrop Medical Products manufactures patented pins that are also used to reassemble broken bones. Both of these imperfectly competitive firms are maximizing profit. If Icarus merges with Pindrop, then the merged firm will maximize profits if it
A) decreases the prices of pins and adhesives.
B) does not change the prices of pins or adhesives.
C) increases the prices of pins and adhesives.
D) None of the above is correct.

Question

Quizplus · Accepted Answer

When two imperfectly competitive firms that produce complementary goods merge, they can maximize profits by increasing the prices of their products, as the combined firm can better coordinate pricing strategies to exploit their market power.

Icarus Medical Supplies Produces Patented Adhesives That Are Used to Reassemble