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.
Whether it is 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 Herfindahl-Hirshman Index.
Answer to Problem 1SCQ
Yes, it is 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 Herfindahl-Hirshman Index.
Explanation of Solution
Since, the market shares of all the firms are included in the HHI calculation, so when there is a merger between the two firms the HHI will change.
So, in the case of four- firm concentration ratio it is possible that the merger between let’s say the 6th and the 5th largest firms in the market would create a new firm that may be ranked in the top four in the market.
So, in the case mentioned above a merger of the two firms that are neither in the top four, but still they would change the four-firm concentration ratio.
So, it is 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 Herfindahl-Hirshman Index.
Want to see more full solutions like this?
Chapter 11 Solutions
PRINCIPLES OF MICROECONOMICS (OER)
Additional Business Textbook Solutions
Horngren's Accounting (12th Edition)
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
Horngren's Accounting (11th Edition)
Managerial Accounting (5th Edition)
Financial Accounting (12th Edition) (What's New in Accounting)
Cost Accounting (15th Edition)
- Based on this information, the four-firm concentration ratio is?arrow_forwardPleasant Island has two natural gas wells, one owned by Mack and the other owned by Tom. Each well has a valve that controls the rate of flow of gas, and the marginal cost of producing gas is zero. The table below gives the demand schedule for gas on this island. Price (dollars per unit) $100 88888; 70 50 30 20 10 0 Quantity Demanded (units per day) If Mack and Tom form a cartel and maximize their joint profits, the price of gas on Pleasant Island will be $ If Mack and Tom are forced to sell at the perfectly competitive price, the price of gas on Pleasant Island will be $ 5 15 25 35 45 55 65 per unit. (Enter your response as a whole number) per unit (Enter your response as a whole number)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_forward
- Use Table to calculate the four-firm concentration ratio for the U.S. auto market. Does this indicate a concentrated market or not?arrow_forwardIn a market with a Duopoly, if Market Demand is P=300-Q find the Cournot reaction curves and the Cournot Quantity solutions then deduce the Price in the case where Marginal Costs curves for either of the Duopoly firms is MC₁=q₁+30 and MC2=q2+30. Compare your results to the case where a Monopolist that has a MC=Q+30 replaces the Duopoly. What are the Monopoly Quantity and Price? Which quantities are bigger, Cournot or Monopoly? What is the Consumer Surplus in both cases? Set-up the Oligopoly model in a game theoretical prisoner's dilemma framework. Explain briefly the strategies and how you reach the Nash Equilibrium.arrow_forwardAn industry consists of three firms with sales of $300,000, $700,000, and $250,000. a. Calculate the Herfindahl-Hirschman index (HHI). b. Calculate the four-firm concentration ratio (C4). c. Based on the FTC and DOJ Horizontal Merger Guidelines described in the text, do you think the Department of Justice would attempt to block a horizontal merger between two firms with sales of $300,000 and $250,000? Explain.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_forwardAssume 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?arrow_forwardSuppose a proposed merger of firms would simultaneously lessen competition and reduce unit costs through economies of scale. Do you think such a merger should be allowed?arrow_forward
- Place the black point (plus symbol) on the following graph to indicate the profit-maximizing price and quantity for BYOB. If BYOB is making a profit, use the green rectangle (triangle symbols) to shade in the area representing its profit. On the other hand, if BYOB is suffering a loss, use the purple rectangle (diamond symbols) to shade in the area representing the loss. 4.00 3.50 Monopoly Outcome 3.00 2.50 Profit 2.00 1.50 Loss ATC 1.00 0.50 MC D MR 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 QUANTITY (Thousands of cans of beer) PRICE (Dollars per unit)arrow_forwardIs the following statement correct? "The antitrust laws in reality deal less with monopolies than with oligopolies."arrow_forwardIn the 1980s, PepsiCo Inc., which then had 28 percent of the soft-drink market, proposed to acquire the Seven-Up Company. Shortly thereafter, the Coca-Cola Company, with 39 percent of the market, indicated it wanted to acquire the Dr Pepper Company. Seven-Up and Dr Pepper each controlled about 7 percent of the market. In your judgment, was the government’s decision to block these mergers appropriate?arrow_forward
- Principles of Economics 2eEconomicsISBN:9781947172364Author:Steven A. Greenlaw; David ShapiroPublisher:OpenStaxEconomics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
- Exploring EconomicsEconomicsISBN:9781544336329Author:Robert L. SextonPublisher:SAGE Publications, Inc