5. Interpreting concentration ratios The following table shows the four-firm concentration ratios of various industries. Industry Computer and electronic parts Greeting cards Photo equipment and supplies Plastics and rubber product manufacturing Coffee and tea manufacturing Four-Firm Concentration Ratio. 19 80 78 10.5 52.5 Based on the data presented in the table, in which of the following industries are sales most concentrated among the four largest firms? Plastics and rubber product manufacturing O Greeting cards O Computer and electronic parts Photo equipment and supplies O Coffee and tea manufacturing
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- Question 1 Firm 1 Firm 2 Firm 3 Firm 4 Firm 5 Beer (in %) 25 15 20 40 0 Chocolate (in%) 30 20 20 20 10 The table above presents the market shares of two industries in &. Total production in the beer industry amounts to 10'000 liter and the chocolate industry to 10 tons. a) Compute the CR4 concentration measure of each industry. b) Compute the HHI measure of each industry. c) Determine the Lerner Index in both markets: assume that in the beer market the cost of production is C=7'000+5*Q² (where Q is beer measured in liters) and the price per liter is 10 and that the chocolate market the cost of production is C=1'000+100*Q² (where Q is measured in tons) and the price per ton is 1'500.Table 18-14 Suppose that two oil companies-BP and Exxon-own adjacent natural gas fields. The profits that each firm earus depends on both the member of wells it drills and the number of wells drilled by the other firm. The table below lists each firm's individual profits: Exxon Drill one well Drill two wells BP Drill one well BP Drill two wells Exxon's profit $10 million BP's profit $10 million Exxon's profit $6 million BP's profit $12 million Exxon's profit $12 million BP's profit $6 million Exxon's profit $8 million. BP's profit $8 million Refer to Table 18-14. Does BP have a dominant strategy? If so, describe it. For the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac) BIUS Paragraph Arial 5 田田田园 10pt 89. M XX, 833 >>() ⒸO HE [+ V A AV ✓ Z X T 94 ΩΘΙ *** 68.88Table 16-3 The following table shows the output produced by each of the top eight firms in four industries as well as the total industry output for those industries. Firm 1 2 3 4 5 6 7 8 Total Industry A 50,000 47,000 43,000 38,000 32,000 25,000 17,000 8,000 270,000 approximately 46% approximately 54% approximately 57% Industry B Industry C 18,000 37,000 17,750 36,500 17,250 35,500 16,500 34,000 15,500 32,000 14,250 29,500 12,750 26,500 11,000 23,000 130,000 300,000 approximately 61% Industry D Refer to Table 16-3. What is the concentration ratio for Industry B? 40,000 39,000 37,000 34,000 30,000 25,000 19,000 12,000 250,000
- ok In the table below are data on five different industries and the market shares for each of the firms in the industry. Assume that there is no foreign competition, entry into the industry is difficult, and that no firm in each industry is on the verge of bankruptcy. In the column to the right of the table, calculate the Herfindahl index. Tint erences esc Market Share of Firms in Industry Industry Alpha Beta Mc Graw Hill Q Short Answer Toolbar navigation Kappa Delta Epsilon BIVS -50--- Di 2 Which industry has the most market power and which industry has the least? P @ W # 3 E 4 Herfindahl index R 1 33 25 20 60 25 5 STAZA % 23 456 22 14 12 10 9 25 25 15 10 20 20 20 20 10 10 10 10 20 15 15 15 10 & Search Protecto Pray T 6 Y 1.5 7 2 Next > 8 1 O O * P |{ dTable 16-1 The following table shows the output produced by each of the top eight firms in four industries as well as the total industry output for those industries. Firm Industry A Industry B Industry C İndustry D 1 50,000 18,000 37,000 36,500 35,500 40,000 2 47,000 17,750 39,000 3. 43,000 17,250 37,000 4 38,000 16,500 34,000 34,000 32,000 15,500 32,000 30,000 25,000 14,250 29,500 25,000 17,000 12,750 26,500 19,000 12,000 8,000 11,000 23,000 Total 270,000 130,000 300,000 250,000 Refer to Table 16-1. Which industry has the highest concentration ratio? Oa. Industry A Ob. Industry D Oc. Industry B Od. Industry CSuppose you are given the following firms and their annual sales data from last year in the cellular phone industry: Firm Sales (millions of dollars) Orange Is Better Than Apple S2, 000 Macro Hard S 1,300 Professors Can't See You Use Our Phones In Class $500 Phones "r" Us $800 Handhelds $1,000 Rings Up $300 We Sell You Cells $1,500 All other cellular phone companies combined sales $10, 700 Calculate the four-firm concentration ratio for this industry (show your work). Assuming that 40 percent is the dividing line between concentrated and competitive for this industry, how would you describe it?
- answer this one 3. Now, suppose that in addition to the home country opening up to free trade, the foreign country has alsoopened up to free trade. As a result, both firms sell their product in both markets.A) Find each firms’ overall output, market price in each market, and each firms’ overall profitB) Explain what effect free trade has (relative to no trade) on the firms and consumers Suppose a firm operates as a monopoly in the domestic (home) market for a product. The demand for itsproduct is given by the inverse demand function: P = 120 −QD. The company’s costs are: T C = 20Q+ 200and MC = $20.A) Find the firm’s profit-maximizing output and price as a monopoly.B) Find the firm’s total profit in the monopoly market.Suppose the home country open up to free trade…Intellectual property laws are intended to promoteinnovation, but some economists, such as MiltonFriedman, have argued that such laws are not desirable.In the United States, there is no intellectual propertyprotection for food recipes or for fashion designs.Considering the state of these two industries, andbearing in mind the discussion of the inefficiency ofmonopolies, can you think of any reasons whyintellectual property laws might hinder innovation insome cases?Use the following table to calculate the four=firm concentration ratio for the U. S. auto market. Does this indicate a concentrated market or not? The table is............. GM 19% Ford 17% Toyota 14% Chrysler 11%
- How do we measure a four-firm concentration ratio? What does a high measure mean about the extent of competition?2. What do we mean by "internalization" and how can we relate the concept of vertical integration with this term? What are the factors that lead the firms to engage in internalization and how is it different from theory of location?1) Consider the following hypothetical industries which are both comprised by 8 firms. In industry A sales are given by 1000, 800, 600, 600, 450, 200, 100, 100 and in industry B by 2000, 500, 500, 200, 150, 150, 150, 100. (a) Calculate the five-firm concentration ratio for each industry. (b) Calculate each industry's H Index and the numbers equivalent. How can the latter be interpreted? (c) Which industry do you think exhibits the most concentration? 2) We defined the Lerner Index as LI = 1/µ where u is the absolute value of the elasticity of demand. We also showed that LI can be alternatively expressed as (P – MC)/P . Use these relationships to show that LI can never exceed 1. What does this imply is the minimum demand elasticity we should ever observe for a monopolist? 3) Consider a market comprised of three firms. Firm 1 produces and sells 23 units per period. Firm produces and sells 19 units per period, while firm 3's periodic production and sales are 15 units. The (inverse) market…