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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Question
Chapter 14, Problem 5.1P
(a)
To determine
Four firm concentration ratio.
(b)
To determine
Herfindahl Herschman Index (HHI).
(c)
To determine
Level of concentration.
(d)
To determine
Measuring merger concentration
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Assume there are six companies in a certain industry. Four companies have $10 sales apiece, while two companies have $5 sales each. What is the industry's four-firm concentration ratio?
Suppose that the most popular car dealer in your area sells 10 percent of all vehicles. If all other car dealers sell either the same number of vehicles or fewer, what is the largest value that the Herfindahl index could possibly take for car dealers in your area? In that same situation, what would the four-firm concentration ratio be?
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 is
(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
Chapter 14 Solutions
Principles of Economics (12th Edition)
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