Reference no: EM13237996
1. a) Consider an industry that has eight firms, with the following market share percentage: 30, 20, 12, 10, 10, 8, 7, and 3. Calculate the four-firm concentration ratio and the (eight-firm) HHI for this industry.
b) Consider an industry that has eight firms, with the following market share percentage: 20, 20, 16, 16, 9, 8, 6, and 5. Calculate the four-firm concentration ratio and the (eight-firm) HHI for this industry.
c) Use your answers to part a) and b) to discuss the advantages of the HHI over the four-firm concentration ratio.
2. a) An industry is currently performing competitively with price equal to marginal cost. If demand is P = 200 - Q and MC = ATC = 50, what are output and price?
b) If a series of mergers monopolizes the industry and results in lower costs such that MC = ATC = 40, what happens to industry output and price? Does this series of mergers improve welfare? Make sure that you draw a graph to demonstrate your analysis and label clearly.
c) Assume instead that the mergers reduced the monopolist's costs to MC = ATC = 20, redo part b).
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: Consider an industry that has eight firms, with the following market share percentage: 30, 20, 12, 10, 10, 8, 7, and 3. Calculate the four-firm concentration ratio and the (eight-firm) HHI for this industry.
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