>When multiple files exist, tools SHOULD merge the configurations with more specific files taking precedence over general ones.

How is the tool supposed to merge multiple md files?

The same way it synthesizes anything else. We're talking about LLMs here; this is their bread and butter.

Most AI solutions make tracing the finally assembled prompt a bit difficult.

However, if you look through the source code or network requests, you’ll see that merging just means naive “concatenation”.