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 2E
To determine
To ascertain: Whether the merger of Firm 2 with Firm 3 will result in precompetitive or anticompetitive, and explain.
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An industry is composed of Firm 1, which controls 70 percent of the market, Firm 2 with 15 percent of the market, and Firm 3 with 5 percent of the market. About 20 firms of approximately equal size divide the remaining 10 percent of the market. Calculate the Herfindahl-Hirschman Index before and after the merger of Firm 2 and Firm 3 (assume that the combined market share after the merger is 20 percent). Would you view a merger of Firm 2 with Firm 3 as procompetitive or anticompetitive? 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): 18 percent, 24 percent, 20 percent,
11 percent, 10 percent, 9 percent, and 8 percent.
The four-firm concentration ratio for the hamburger industry in this town is
percent. (Enter your response as a whole number.)
The Herfindahl index for the hamburger industry in this town is
(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.)
Suppose the top three sellers combined to form a single firm.
The Herfindahl index would be
(Enter your response as a whole number.)
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.)
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 (Enter your response as a whole number.)arrow_forwardConsider a market with four firms. Suppose the first firm has a 39% market share, the second firm has a 30% market share, the third firm has a 20% market share, and the fourth firm has a 11% market share. Using the Herfindahl-Hirschman Index (HHI), what is this market's level of concentration? Now suppose the third and fourth firms propose to merge. Were they to merge, then the market's HHI would increase to? Given the increase in the HHI that would be caused by the proposed merger, would the government likely allow such a merger to occur?arrow_forwardSuppose that a small town has seven burger shops whose respective shares of the local hamburger market are (as percentages of all hamburgers sold): 23 percent, 22 percent, 18 percent, 12 percent, 11 percent, 8 percent, and 6 percent. What is the four-firm concentration ratio of the hamburger industry in this town? What is the Herfindahl index for the hamburger industry in this town? If the top three sellers combined to form a single firm, what would happen to the four-firm concentration ratio and to the Herfindahl indexarrow_forward
- Given the information on the preceding graph, use the blue line (circle symbol) to graph the demand curve for the dominant firm (also known as the residual demand curve) and the black line (plus symbol) to graph the marginal revenue curve for the dominant firm on the following graph. (Hint: The slope of the marginal revenue curve is twice that of the demand curve since the demand curve is linear in this case.) Price (Dollars per box of cereal) 20 0 D MC of Dominant Firm 20 40 60 80 10 120 140 160 180 200 220 240 QUANTITY (Millions of boxes of cereal per year) DF Demand Marginal Revenue This graph also shows the dominant firm's marginal cost curve. Given that cost curve, as well as the demand and marginal revenue curves you derived, the price of a box of cereal will be $ under the price leadership model.arrow_forwardYou 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. Oarrow_forwardSuppose that the six firms in industry A have annual sales of 40, 35, 12, 5, 5, and 3 percent of total industry sales. For the six firms in industry B, the figures are 35, 18, 15, 14, 10, and 8 percent. b. Calculate the four-firm concentration ratio and the Herfindahl index for each industry and compare their likely competitiveness. Instructions: Enter your answers as whole numbers. Industry A four-firm concentration ratio = Industry A Herfindahl index = Industry B four-firm concentration ratio = Industry B Herfindahl index = c. Industry A will be ________ (more/less) competitive than industry B. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forward
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