The image presents a scenario for calculating the Herfindahl-Hirschman Index (HHI) to evaluate a proposed merger's impact on market competition. It outlines the following:1. **Scenario Description**: An industry consists of 50 firms, each holding a 2 percent market share. The task is to assess whether a merger between two firms would be permissible according to the HHI criteria set by the Department of Justice and the Federal Trade Commission.2. **Question Prompts**: - First, determine the HHI before the proposed merger by entering an integer value. - Next, calculate the HHI with the proposed merger and enter the result as an integer. - A dropdown menu offers options to predict whether the Department of Justice and the Federal Trade Commission would challenge the merger. The options include: - Probably would not - Would - May - Would not3. **HHI Calculation**: - **Before the Merger**: Each firm has a 2% market share. The HHI is calculated by squaring the market share of each firm and summing these values: \[ HHI = 50 \times (2^2) = 200 \] - **With the Merger**: After the merger, the new entity would hold a 4% market share: \[ HHI = 49 \times (2^2) + (4^2) = 196 + 16 = 212 \]The text serves as an educational example of how to calculate HHI and consider regulatory implications for market mergers.

We will use the formula to calculate Herfindhal Hirschman Index (HHI)We have 50 firms in the market with 2% market size allotted to each of the firm. HHI = sum of square of market size*100 =(2%*100)^2+(2%*100)^2+...+ (2%*100)^2 =50*4 =200 a) Therefore HHI before the merger is =200 After the merger of two firms out of fifty firms, the following effect on HHI is seen =4^2+48*2^2 =16+192 =208 b) Therefore HHI after the merger is =208 When the HHI remains below 1500 it is assumed to be unconcentrated industry. c) Hence, the department of justice and federal trade commission would not challenge the proposed merger

Business

Economics

Suppose an industry has 50 firms, each with an equal 2 percent share of the market. According to the Herfindahl-Hirschman Index (HHI), if two firms propose to merge, will the Department of Justice and the Federal Trade Commission allow it? First, the HHI before the proposed merger isO (Enter your response as an integer value.) With the proposed merger, the HHI is (Enter your response as an integer value.) The Department of Justice and the Federal Trade Commission challenge the proposed merger. probably would not would may would not

Suppose an industry has 50 firms, each with an equal 2 percent share of the market. According to the Herfindahl-Hirschman Index (HHI), if two firms propose to merge, will the Department of Justice and the Federal Trade Commission allow it? First, the HHI before the proposed merger isO (Enter your response as an integer value.) With the proposed merger, the HHI is (Enter your response as an integer value.) The Department of Justice and the Federal Trade Commission challenge the proposed merger. probably would not would may would not

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

A market has the following demand function: 1 P = 120 where Q, Σ0 a) Assuming Cournot-Nash market, fill in the table below when firm one has MC, = 10, firm two has MC, = 20 and firm three has MC, = 20. Additionally, there is no Fixed cost for none of the firms. b) Using data from the table below, explain the merger paradox when firms 2 and 3 merge. How the merged firm (firm 2 and 3) will be worse off? c) How would this outcome differ if all three firms merged? Industry level Output Number of Firm level Firms Price Profits Output Profits 1 3
q4 A B and C only please thank you!
The following table lists the market shares of the eight firms in an industry. Market Shares for Eight Firms in an Industry Firm Market Share 1 3030 2 2828 3 2323 4 1010 5 44 6 33 7 11 8 11 Calculate the Herfindahl-Hirschman Index (HHI) for this industry. Enter your answer in the box below, and round to the nearest whole number if necessary.
Suppose that there are N = 10 firms in a market, and each of them have an equal share of the market, so that Si = 1/N= 1/10 for each firm. What is the value of the Herfindahl-Hirshman index in this market? 0.01 0.5 1 0.1
Hi I need help with the worksheet below.
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.
Firm Market Share (%) A 18 B 17 C 17 D 17 E 16 F 15 Refer to the data. Suppose that firms in this industry split up such that there were 20 firms, each with a 5 percent market share. The four-firm concentration ratio and the Herfindahl index respectively would be
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 $375,000, $305,000, $245, 000, and $ 195,000, respectively. Calculate the four - firm concentration ratio in the market for product X.
Industry A consists of four firms, each of which has an equal share of the market. What is the Herfindahl–Hirschman index for the industry?
oligopoli 5.1 The following table represents the market share percent- age for each firm in a hypothetical industry. Firm Market Share A 15 C D E 20 B 6 12 7 H 19 11 F G 10 a. Calculate the four-firm concentration ratio for this industry. b. Calculate the Herfindahl-Hirschman Index (HHI) for this industry. c. Would the Justice Department consider this industry as unconcentrated, moderately concentrated, or concen- trated? Why?
Use the following table to calculate the Herfindal-Hirshman Index for the U.S. auto market. Would the FTC approve a merger between Gm and Ford? Explain your response. The table is......... GM 19% Ford 17% Toyota 14% Chrysler 11%
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