Normally, if we run hg merge at this point, it will drop us into a GUI that will let us manually resolve the conflicting edits to myfile.txt. However, to simplify things for presentation here, we'd like the merge to fail immediately instead. Here's one way we can do so.
$ export HGMERGE=merge <---- s.b. false, not merge
We've told Mercurial's merge machinery to run the command false (which, as we desire, fails immediately) if it detects a merge that it can't sort out automatically.