A small European airline currently produces at point X on its long-run average cost curve. It wants a bigger share of the European airline market and proposes to merge with another small European airline. The newly merged firm would produce at point Y on the long-run average cost curve, as shown. [Figure]. Why might the newly merged firm be able to produce at point Y? A The new airline can negotiate discounts when buying fuel. B The new airline has many layers of management. C The new airline is unable to hire enough pilots. D The workforce of the new airline lacks morale and is demotivated.

This question uses a diagram from the original paper, which isn't shown here. Open the full paper from the past papers archive to see it.