Industry Alpha Beta Market Share of Firms in Industry 2 Kappa Delta 1 8838 30 80 30 10 25 10 10 20 The table shows market shares of firms in hypothetical industries. Assume these are distinct industries with no buyer-seller relationships or competition among them. A merger between Firm 2 and Firm 3 in Alpha would be a 25 20 3 20 Select one: O a. conglomerate merger. O b. diagonal merger. O c. vertical merger. O d. horizontal merger. 4 20 3 25 20 5 25 20 5 6 1 1

Industry Alpha Beta Market Share of Firms in Industry 2 Kappa Delta 1 8838 30 80 30 10 25 10 10 20 The table shows market shares of firms in hypothetical industries. Assume these are distinct industries with no buyer-seller relationships or competition among them. A merger between Firm 2 and Firm 3 in Alpha would be a 25 20 3 20 Select one: O a. conglomerate merger. O b. diagonal merger. O c. vertical merger. O d. horizontal merger. 4 20 3 25 20 5 25 20 5 6 1 1

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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3. Consider a market in which a monopolist would charge at a price of $10 for a particular good. Assume now the market is currently dominated by a pair of Bertrand duopolists who produce identical goods and compete on price in a one-shot game. They both face a marginal cost of $5. They start with colluding and agreeing to charge the monopoly price of $10 in an effort to maximize their profits. In equilibrium, the market price of the good will be.... (a) Over $10 (b) $10 (c) Between $5 and $10 (d) $5 (e) Less than $5 (f) None of the above Answer: 3d. A price war will break out, lowering the price to $5.
7. The table below shows the annual profits of two UK paint manufacturers. At present they both charge £20.00 per litre for gloss paint. Their annual profits are shown in box A. The other boxes show the effects on their profits of one or the other, or both firms reducing their price to £16.00 per litre. £20.00 Fenton's price i. ii. £16.00 A B £20.00 £6m each Mellow's price £9m for Fenton £3m for Mellow с £16.00 £3m for Fenton £9m for Mellow £4m each (a) Which of the two prices should Mellow charge if it assumes that Fenton will set its price at £20?. it assumes that Fenton will set its price at £16? ... (b) Which of the two prices should Fenton charge if i. ii. it assumes that Mellow will set its price at £20? it assumes that Mellow will set its price at £16? (c) Why is this known as a dominant strategy game? £20.00/£16.00 £20.00/£16.00 £20.00/£16.00 £20.00/£16.00 (d) Assume now that the 'game' between Fenton and Mellow has been played for some time with the result that they both learn…
8.In 2019, competition authorities threw out a merger of Asda and Sainsbury’s. What type of growth would the merger of Asda and Sainsbury’s have represented? a) Horizontal expansion b) Horizontal integration c) Conglomerate merger d) Vertical integration e) Horizontal alliance
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.
Question 35 (Table: Three-Country Oil Production) Refer to the table. Suppose that three countries are engaged in oil production. For simplicity, assume zero costs so that revenue equals profit. Assume that country A cheats on the cartel agreement by producing 200 more barrels than the other two countries. What is the resultant profit earned by country A? Market Price 6,000 Total Market Output 600 800 1,000 1,200 1,400 1,600 1,800 O 24,000 O 30,000 O 70,000 90 80 70 60 50 40 30
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3. Firm A and Firm B are two firms in an industry. Firm A and Firm B are planning to merge. (a) Firm A and Firm B are Bertrand duopolists with identical and constant marginal costs. Post-merger marginal cost is lower than pre-merger. Use a figure that includes a downward-sloping linear market demand to show how the merger of Firm A and Firm B will lead to anticompetitive losses as well as cost-savings. (b) Firm A and Firm B are Cournot duopolists with identical marginal costs. Post- merger marginal cost is the same as pre-merger. Use a figure that includes a downward-sloping linear market demand to show how the merger of Firm A and Firm B will lead to anticompetitive losses. (c) Firm A and Firm B are Stackelberg competitors with identical marginal costs. Post-merger marginal cost is the same as pre-merger. Firm A is the Stackelberg leader. Use a figure that includes a downward-sloping linear market demand to show how the merger of Firm A and Firm B will lead to anticompetitive losses.…
1. The table below shows the percentage of sales held by the four largest firms in an industry. Company A B C D Market share (percent of sales) 12 10 5 3 a) Calculate this industry's four-firm concentration ratio. b) Is this industry competitive? why? c) What market type does it most likely represent?
6. Given the market shares below, calculate the Herfindah-Hirschman Index (HHI). Would the Federal Trade Commission approve a merger between GM and Ford? Company Market Share (in Percent) GM 21 Ford 19 Toyota 16 Chrysler 13 Nissan 9 Hyundai 7 Kia 6 Subaru 5 Volkswagen 4
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 Greeting cards O Computer and electronic parts Photo equipment and supplies O Coffee and tea manufacturing
6. Consider a duopoly in which inverse demand is given by P= 100-Q, where Pis the price and Q is aggregate output. The marginal cost of each firm is initially equal to 55 and there are no fixed costs. The firms compete by simultaneously setting quantities. (a) What is the equilibrium quantity of each firm, the equilibrium price and the profit of each firm? Now assume that one of the firms, firm 1, develops a new technology that reduces its own marginal cost to 25. (b) If firm 1 keeps this innovation for itself (so that the marginal cost of firm 2 is still 55), what will be the new equilibrium levels of output, price and profits of the two firms? What is the consumer surplus in the market? Do consumers benefit from the innovation?