Economics (MindTap Course List)
13th Edition
ISBN: 9781337617383
Author: Roger A. Arnold
Publisher: Cengage Learning
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Chapter 25.1, Problem 3ST
To determine
Explain the advantage of Herfindahl index over four-firm and eight-firm concentration ratios.
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what is the Four-firm concentration ratio (CR4)?
what is the Herfindahl-Hirshman Index (HHI)?
and how are they different?
Is it true that a merger between two firms that are not already in the top four by size can affect both the four-firm concentration ratio and the Her findahl-Hirshman Index? Explain briefly.
Based on this information, the four-firm concentration ratio is?
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Economics (MindTap Course List)
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- Is it true that a merger between two films that are not already in the top four by size can affect both the four-firm concentration ratio and the Herfindahl-Hirshmau Index? Explain briefly.arrow_forwardPlace the black point (plus symbol) on the following graph to indicate the profit-maximizing price and combined quantity of output if Mays and McCovey choose to work together. 2.00 Demand 1.80 Monopoly Outcome 1.60 1.40 MC = ATC 1.20 1.00 0.80 0.60 0.40 0.20 MR 90 180 270 360 450 540 630 720 810 900 QUANTITY (Cans of beer) PRICE (Dollars per can)arrow_forwardHow do we measure a four-firm concentration ratio? What does a high measure mean about the extent of competition?arrow_forward
- The following table presents information on the production of five firms that produce all of the output in an industry. Firm A B с D E Output (units) 900 900 900 100 100 Instructions: Round your answers to two decimal places. a. What is the four-firm concentration ratio for this industry? b. What is the Herfindahl-Hirschman Index for this industry?arrow_forwardConsider the firm Novo Nordisk and the production of Ozempic, a class of diabetes drugs which can additionally be used to treat weight-loss by mimicking GLP-1 to suppress appetite. At present, the firm has mostly a monopoly on this kind of injectable drug where semaglutide is the key active ingredient. For some context, read the following freely available articles: 1. https://theconversation.com/ozempic-the-miracle-drug-and-the-harmful-idea-of-a-future-without-fat-211661 2. https://fortune.com/europe/2024/03/28/ozempic-maker-novo-nordisk-facing-pressure-as-study-finds-1000-appetite-suppressant-can-be-made-for-just-5/ [or, access via Login to Curtin Library: https://search.ebscohost.com/login.aspx?direct=true&AuthType=sso&db=bsu&AN=176267009&site=ehost-live&custid=s8423239] 3. https://www.usatoday.com/story/news/health/2024/03/29/ozempic-wegovy-weight-loss-diabetes-drug-cost/73125135007/ 4.…arrow_forwardStep 1 of 2: Use the following table with the sample data to calculate the four-firm concentration ratio for the U.S. auto market. Round your answer to the nearest whole number if necessary. Market Shares in the U.S. Auto Market GM 18%18% Ford 16%16% Toyota 14%14% Chrysler 10%arrow_forward
- The following table lists the market shares of the eight firms in an industry. Market Shares of Eight Firms in an Industry Firm Market Share 1 3333 2 2828 3 1515 4 88 5 55 6 55 7 44 8 22 Calculate the four-firm concentration ratio for this industry. Enter your answer in the box below, and round to the nearest whole number if necessary.arrow_forwardPRICE (Dollars per can) 2.00 1.80 1.60 Demand 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0 0 MC = ATC MR 90 180 270 360 450 540 630 720 810 900 QUANTITY (Cans of beer) Monopoly Outcome $0.80 per can. Given this When they act as a profit-maximizing cartel, each company will produce 180 cans and charge information, each firm earns a daily profit of $144.00, so the daily total industry profit in the beer market is $288.00. Oligopolists often behave noncooperatively and act in their own self-interest even though this decreases total profit in the market. Again, assume the two companies form a cartel and decide to work together. Both firms initially agree to produce half the quantity that maximizes total industry profit. Now, suppose that Stargell decides to break the collusion and increase its output by 50%, while Schmidt continues to produce the amount set under the collusive agreement. Stargell's deviation from the collusive agreement causes the price of a can of beer to now $ , while Schmidt's…arrow_forwardUse 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%arrow_forward
- Is it true that the four-firm concentration ratio puts more emphasis on one or two very large films, while the Herfindahl-Hirshmau Index puts more emphasis on all the films in the entire market? Explain briefly.arrow_forwardSuppose Farmer Smith from Kansas and Farmer Jones from Missouri agree to restrict their combined output of wheat in an attempt to increase the price and profits. How likely do you think the Smith-Jones cartel is to suceed? Explain.arrow_forwardP 14 13 12 11 10 9 8 7 6 5 QD 50 100 150 200 250 300 350 400 450 500 Consider a market with the above demand and two firms. Both firms have a constant marginal cost of 7. What price should these firms charge to maximize total industry profit? (Note: the marginal condition we learned will work here but you need to be careful because the changes in quantity on the schedule are not 1. Because of this, you might want to use a brute force approach here. It's worth thinking about how you would reconcile it with the marginal condition though. Also, the marginal condition doesn't match exactly so take the best number from the schedule.) Assuming that if they set the same price, they split the market evenly, what will the profit of each firm be if they both set the above price? Now imagine that the firms agree to both set the above…arrow_forward
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