Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN: 9781305506381
Author: James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher: Cengage Learning
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Question
Chapter 16, Problem 3E
A.
To determine
To ascertain:Whether the antitrust division challenge a merger between firms D and C.
B.
To determine
To ascertain:Whether the antitrust division challenge a merger between firms F and G.
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An industry consists of three firms with sales of $300,000, $700,000, and $250,000. a. Calculate the Herfindahl-Hirschman index (HHI). b. Calculate the four-firm concentration ratio (C4). c. Based on the FTC and DOJ Horizontal Merger Guidelines described in the text, do you think the Department of Justice would attempt to block a horizontal merger between two firms with sales of $300,000 and $250,000? Explain.
Suppose that a small town has seven burger shops whose respective shares of the local hamburger market are (as percentages of all hamburgers sold): 22 percent, 22 percent, 18 percent, 11 percent, 10 percent,
9 percent, and 8 percent.
The four-firm concentration ratio for the hamburger industry in this town is 73 percent. (Enter your response as a whole number.)
The Herfindahl index for the hamburger industry in this town is 1658. (Enter your response as a whole number.)
Suppose the top three sellers combined to form a single firm.
The four-firm concentration ratio would be 92 percent. (Enter your response as a whole number.)
Suppose the top three sellers combined to form a single firm.
The Herfindahl index would be (Enter your response as a whole number.)
You are a manager in a market composed of eight firms, each of which has a 12.5% market share. The premerger Herfindahl-Hirschman index (HHI) for this market equals
If any two of these firms merge, the post-merger HHI equals
Based on this information and the Horizontal Merger Guidelines described in this course, which of the following statements is true?
A. A merger like this leads to an unconcentrated market and is typically permitted.
B. A merger like this leads to a moderately concentrated market and potentially raises antitrust concerns.
C. A merger like this leads to a highly concentrated market and potentially raises antitrust concerns.
D. A merger like this leads to a highly concentrated market, is presumed to enhance market power, and will almost certainly be blocked.
E. Other/None of the above/Not enough information provided.
O
Chapter 16 Solutions
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
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Similar questions
- Suppose that a small town has seven burger shops whose respective shares of the local hamburger market are (as percentages of all hamburgers sold): 22 percent, 22 percent, 18 percent, 11 percent, 10 percent, 9 percent, and 8 percent. The four-firm concentration ratio for the hamburger industry in this town is 73 percent. (Enter your response as a whole number.) The Herfindahl index for the hamburger industry in this town is 1658. (Enter your response as a whole number.) Suppose the top three sellers combined to form a single firm. The four-firm concentration ratio would be percent. (Enter your response as a whole number.)arrow_forwardFour Cournot competitors face an inverse market demand curve of P = 1620 – 8Q, each with identical costs Ci = 4000 + 60qi. Find firm profits, market price, and consumer surplus at a Cournot equilibrium to answer the following questions. a) show that a merger between F3 and F4 will not be profitable if their costs remain unchanged. (Hint: the “n” in the profit formula changes from 4 to 3.)arrow_forwardBased on United States Census Bureau data for 2017, for the utilities (electricity and gas) industry the four firm concentration ratio (C4) is 16.2 percent and the Herfindahl-Hirschman index is 161.4. Why might the actual concentration, and therefore market power enjoyed by a specific utility company in a state, be greater than what is indicated by these numbers? These ratios are calculated for the entire country, and not for a specific city or state. Please give an explanation.arrow_forward
- Ten firms compete in a market to sell product X. The total sales of all firms selling the product are $1,500,000. Ranking the firms' sales from highest to lowest, we find the top four firms' sales to be $310,000, $235,000, $205,000, and $ 140,000, respectively. Calculate the four - firm concentration ratio in the market for product X. Instruction: Enter your response rounded to two decimal places,arrow_forwardTwo firms, A and B, face an inverse market demand function of P = 1200 - 4Q. Each firm has the same cost function Ci = 20qi. Assume the A and B are Stackelberg competitors, and that A is the leader. Derive from profit functions the equilibrium prices, quantities, and profits for A and B. How does the methodology for solving the Stackelberg problem differ from the method for solving the Cournot problem? Why?arrow_forwardBased on United States Census Bureau data for 2017, for the utilities (electricity & gas) industry the four firm concentration ratio (C4) is 16.2 percent and the Herfindahl-Hirschman index is 161.4. Why might the actual concentration, and therefore market power enjoyed by a specific utility company in a state, be greater than what is indicated by these numbers? These ratios are calculated for the entire country, and not for a specific city or state. Explain & show work.arrow_forward
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