Econ Micro (book Only)
6th Edition
ISBN: 9781337408066
Author: William A. McEachern
Publisher: Cengage Learning
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Question
Chapter 15, Problem 7P
To determine
The Herifindahl-Hirschman Index (HHI) for each of the following industries and the industry that is the most concentrated
- An industry with five firms with market shares: 50 percent, 30 percent, 10 percent, 5 percent, and 5 percent.
- An industry with five firms with market shares: 60 percent, 20 percent, 10 percent, 5 percent and 5 percent
- An industry with five firms, each having a 20 percent market share.
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Chapter 15 Solutions
Econ Micro (book Only)
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- 1. There are 10 firms in an industry, and each firm has a market share of 10 percent. The industry’s Herfindahl index is a. 10. b. 100. c. 1,000. d. 10,000. 2. In the small town of Geneva, there are five firms that make watches. The firms’ respective output levels are 30 watches per year, 20 watches per year, 20 watches per year, 20 watches per year, and 10 watches per year. The four-firm concentration ratio for the town’s watch-making industry is: a. 5. c. 90. b. 70. d. 100. 3. Which of the following best describes the efficiency of monopolistically competitive firms? a. Allocatively efficient but productively inefficient. b. Allocatively inefficient but productively efficient. c. Both allocatively efficient and productively efficient. d. Neither allocatively efficient nor productively efficient.arrow_forward(Table: Demand Schedule of Whatchamacallits) Use Table: Demand Schedule of Whatchamacallits. The market for whatchamacallits consists of two producers, Emma and Joshua. Each firm can produce whatchamacallits with no marginal cost or fixed cost. Suppose that these two producers have formed a cartel, agreed to split production of output evenly, and are maximizing total industry profits. If Emma decides to cheat on the agreement and sell 100 more whatchamacallits, Emma's profit will be and Joshua's profit will be Table: Demand Schedule for Whatchamacallits Price of a Quantity of Whatchamacallit Whatchamacallits $10 9 8 7 6 5 4 3 2 1 0 a) $1,250; $1.250 b) $1,000; $1,400 c) $500; $500 d) $1,400; $1,000 Demanded 0 100 200 300 400 500 600 700 800 900 1,000arrow_forwardQUESTION 7 Suppose two firms (X and Y) want to merge together. X currently controls 50.59% of the market, and Y currently controls 35.96% of the market. If X and Y merge, by how many points will the HHI increase? with X and Y separate) Hint this is the value of (HHI with X and Y merged) - (HHI Round your answers to two (2) decimal places if necessaryarrow_forward
- Carrot Computers and its competitors purchase touch screens for their tablet computers from several suppliers. The six makers of touch screens have market shares of, respectively, 19 percent, 18 percent, 14 percent, 16 percent, 20 percent, and 13 percent. a. What is the Herfindahl index for the touch screen manufacturing industry? b. By how much would a proposed merger between the two smallest touch screen makers increase the Herfindahl index? Would the government be likely to challenge that proposed merger? c. If Carrot Computers horizontally merges with its competitor Blueberry Handhelds, by how much would the Herfindahl index change for the touch screen industry?arrow_forwardB.A measure called Herfindahl-Hirschman Index is used to measure the degree of competition in an industry. The HHI is the square of each firm's market share summed over the firms in the industry. (Where market share is the percentage of sales in the market accounted for by that firm). For example, if an industry contains only three firms and their market shares are 60%, 25%, and 15% then the HHI (by squaring each firm's share and summing them) is 4450. Some economists classify the market structures according to HHI scores. An HHI below 1,500 indicates astrongly competitive market, between 1,500 and 2,500 indicates a somewhat competitivemarket, and over 2,500 indicates an oligopoly. Given the information in the table, calculate the HHI in this industry. If yahoo and Bing were to merge, what would the HHI be? Search engine Market share Google 67% Bing 18 Yahoo! 11 Activate Windo Go to Settings to act Ask 3 AOL 1arrow_forward3. The bicycle industry consists of seven firms. Firms 1, 2, 3, each has 20% of the market share, and Firms 4, 5, 6, 7, each has 10% of the market share. 3.а Calculate C4 for the industry. 3.b Calculate HHI for the industry. 3.с Now suppose that Firms 3 and 4 merge, so that the new merged firm has a market share of 30%. Calculate the change of HHI caused by this merger.arrow_forward
- 1. Tom Jackson has been running a successful steakhouse that specializes in serving upscale steak dinners. His current marketing campaign targets residential households. Recently, it was announced that a new conference hotel was to open near his steakhouse, bringing in many potential business customers. Speculation followed that Morton's steakhouse-an upscale steakhouse chain currently marketing to business customers nationallywas considering opening one of its restaurants near the new hotel and would therefore compete with Tom's restaurant. In light of the potential threat from Morton's, Tom began considering the possibility of making a significant investment to change his marketing campaign and target businesses rather than households. In doing so, he estimated the following profit outcomes (in thousands of dollars) resulting from the strategies that he and Mortons might implement: Morton's Marketing Target Enter Don't Enter -$200, -850 $50, $100 $105, $0 Businesses $90, $0 Тоm…arrow_forwardJsing the data in the table below, find the change in the Herfindahl-Hirschman index if Microsoft sold its smartphone division to Research In Motion (RIM; also known as BlackBerry). Percentage Share of U.S. Smartphone Sales, 2050 Firm Percentage of sales Samsung Android 41 40% iPhone 43 30 RIM xix 20 Microsoft 35 10 Change in H-H index from sale:arrow_forwardCarrot Computers and its competitors purchase touch screens for their tablet computers from several suppliers. The slx makers of touch screens have market shares of, respectively, 19 percent, 18 percent, 12 percent, 18 percent, 21 percent, and 12 percent. Instructions: Enter your answers as a whole number. a. What is the Herfindahl index for the touch screen manufacturing industry? ok b. By how much would a proposed merger between the two smallest touch screen makers increase the Herfindahl index? rint Is the government likely to challenge that proposed merger? brences (Click to select) : c. If Carrot Computers horizontally merges with its competitor Blueberry Handhelds, by how much would the Herfindahl index change for the touch screen industry?arrow_forward
- Problem 12-1 (Algo) Suppose that a small town has seven burger shops whose respective shares of the local hamburger market are (as percentages of all hamburgers sold): 25%, 22%, 18%, 12%, 11%, 8%, and 4%. Instructions: Enter your answers as whole numbers. a. What is the four-firm concentration ratio of the hamburger industry in this town? 0%. b. What is the Herfindahl index for the hamburger industry in this town? c. If the top three sellers combined to form a single firm, what would happen to the four-firm concentration ratio and to the Herfindahl index? The four-firm concentration ratio would be O%. The Herfindahl index would bearrow_forwardUnsure which is the correct answers Suppose that three firms make up the entire wig manufacturing industry. One has a 50% market share, and the other two have a 25% market share each. The Herfindahl index of this industry is a. 3,750 b. 1,000 c. 10,000 d. 5,000 e. 2,500 Mane Attraction, one of the firms with a 25% market share in the wig manufacturing industry, leaves the market. This would cause the Herfindahl index for the industry to __-- a. remain the same b. fall c. rise The largest possible value of the Herfindahl index is 10,000 because: a. an index of 10,000 corresponds to 100 firms with a 1% market share each b. an index of 10,000 corresponds to a monopoly firm with 100% market share c. an industry with an index higher than 10,000 is automatically regulated by the Justice Departmentarrow_forward1arrow_forward
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