Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Chapter 13, Problem 5.1P
To determine
Anti-trust laws.
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In 2015, Apple introduced the Apple Watch. Assume that the cost of producing the 38mm Apple Watch Sport was $73. The price was $363. What was Apple's price/marginal
cost ratio? What was its Lerner Index? If Apple is a short-run profit-maximizing monopoly, what elasticity of demand did Apple believe it faced?
Apple's price/marginal cost ratio was 4.97. (Enter your response rounded to two decimal places.)
The value of Apple's Lerner Index (L) was 80. (Enter your response rounded to two decimal places.)
Apple's elasticity of demand (e) is. (Enter your response rounded to two decimal places and include a minus sign.)
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11 Fill in the blank with the correct answer by typing in the box. Unlike the demand curve for a perfectly
competitive firm, the demand curve for a monopoly is
Merger of beer giants faces obstacles
Mega-brand beers have lost market share to wine and craft beer. In response, Anheuser-Busch InBev and SABMiller, the two biggest brewers in the world, are discussing a merger that would be scrutinized by antitrust regulators.
Source: The New York Times, September 16, 2015
How would a merger benefit the two big brewers? Under what circumstances would the Federal Trade Commission (FTC) challenge the merger?
A merger would benefit the two big brewers because
O A. the price of beer would fall close to the price in a perfectly competitive market and sales would increase
O B. average total cost would increase but price would increase by more than average total cost
O C. the price of beer could rise close to the monopoly price and economic profit would increase
O D. many craft brewers would be forced out of the market
The Federal Trade Commission would challenge the merger if
O A. it increases the HHI
O B. the HHI is less than 1,500
O C. the HHI is…
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Principles of Economics (12th Edition)
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- 20arrow_forwardThe table below shows revenue data for different firms producing refrigerators. Use the given information to find the market share of each firm. The "other" row is comprised of a number of small firms. Round each value to at least 1 decimal point. Firm Revenue Market Share Acme Co 450 Baluga, LLC 685 Corky Co 325 Dingo Inc 660 Eagle Inc 700 Fox Inc 765 Other 755 What is the Four Firm Concentration Ratio?arrow_forwardAnswer the given question with a proper explanation and step-by-step solution. Why is it important for the United States to have laws such as the Sherman Antitrust Act and the Clayton Antitrust Act? Can you describe corporations today that are taking such a large part of market share that it's difficult for smaller companies to enter the market?arrow_forward
- Economics Explain why a monopoly producer of shoes will not vertically integrate with perfect competitive distributors, and why a monopoly producer will vertically integrate with a monopoly distributor. Draw the appropriate graphs to explain these cases.arrow_forwardPart 1. Suppose that you overhear a foursome of physicians on the golf course discussing the prices they charge for an office visit. Suppose further that you hear them reach an agreement to all charge a fee of $ 100 for an office visit. What is such an agreement called in antitrust policy, and what antitrust law may have been violated? Part 2. Suppose that emergency room services in the city of Frederiksberg are provided by three hospitals. Two of the hospitals each have a market share of 40% and the third hospital has a market share of 20%. The two largest hospitals plan to merge. Compute the pre-merger and post -merger HHI for this market. Based on the hospital merger guidelines, would this merger likely be challenged by the antitrust authorities?arrow_forwardIn 2015, Apple introduced the Apple Watch. Assume that the cost of producing the 38mm Apple Watch Sport was $83. The price was $336. What was Apple's price/marginal cost ratio? What was its Lerner Index? If Apple is a short-run profit-maximizing monopoly, what elasticity of demand did Apple believe it faced? Part 2 Apple's price/marginal cost ratio was enter your response here.arrow_forward
- Please watch the following TED Talk titled “The new age of corporate monopolies”:https://www.youtube.com/watch?v=yNhu0MG_2MA. Please explain why competition isimportant in the market. Type your answers and submit them to Blackboard (Maximum: 300words).arrow_forwardMany firms that sell in small markets are effectively monopolies; they are the sole provider of a good in their geographic area. Most of these firms earn positive economic profits, yet they are allowed to operate as monopolies without regulation by government. Why?arrow_forwardTable 17-4 Only two firms, ABC and MNO, sell a particular product. The following table shows the demand curve for their product. Each firm has the same constant marginal cost of $4 and zero fixed cost. Price (Dollars per unit) 14 13 12 11 11 10 9 8 7 7 6 5 5 A 4 3 2 2 1 0 Quantity Demanded Total Revenue (Dollars) 0 65 120 QUESTION 9 (Units) 0 5 10 15 20 20 25 30 35 40 45 50 55 60 65 70 165 200 200 225 240 245 240 225 200 165 120 65 0 Refer to Table 17-4. If ABC and MNO operate to jointly maximize profits and agree to share the profit equally, then how much profit will each of them earn? O a. $125.00 O b. $62.50 O c. $225.00 O d. $24.00arrow_forward
- The table below shows revenue data for different firms producing cleaning products. Use the given information to find the market share of each firm. Firm Revenue in $ Market Share in % Aardvark Inc 325 Baluga LLC 340 Cran Inc 140 Dingo Inc 495 Eagle Inc 360 Keep 2 decimals for the market share percentages What is the Four Firm Concentration Ratio? Is this market concentrated? OYes ONoarrow_forward4.arrow_forwardUse the following graph to answer the next 3 questions. The following graph shows the demand and marginal revenue in two markets (1 and 2) for a price-discriminating firm, along with its total marginal revenue and marginal cost. Price and cost (dollars) 50 50 40 40 30 20 20 10 $ D1 MR 1 MR 2 MC D2 22 MR total 0 50 100 150 200 250 300 350 400 450 500 Quantity Question 43 Using the above graph, what amount of total amount should the firm produce? a) 100 units b) 175 units c) 225 units d) 275 units e) 350 units Question 44 How should the firm allocate that sales output between the two mar- kets? a) 112.5 units in each market b) 100 units in market 1; 175 units in market 2 c) 150 units in market 1; 300 units in market 2 d) 75 units in market 1; 150 units in market 2 e) None of the above. Question 45 What price should the firm charge within each market? a) P₁ = $20; P₂ = $32.50 b) P₁ = $35; P₂ = $22.50 c) P₁ = $20; P2 = $20 d) P₁ = $27.50; P₂ = $35 e) None of the above.arrow_forward
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