You are the manager in a market composed of five firms, each
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You are the manager in a market composed of five firms, each of which has a20 percent market share. In addition, each fi
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You are the manager in a market composed of five firms, each of which has a20 percent market share. In addition, each firm has a strong financial positionand is located within a 100-mile radius of its competitors.a. Calculate the premerger Herfindahl-Hirschman index (HHI) for this market.b. Suppose that any two of these firms merge. What is the postmerger HHI?c. Based only on the information contained in this question and on the U.S.Department of Justice Horizontal Merger Guidelines described in thischapter, do you think the Justice Department would attempt to block amerger between any two of the firms? Explain.2. Use the accompanying graph to answer the questions that follow.Price2202102001901801701601501401301201101009080706050403020100MCATCMRDQuantity0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25a. Suppose this monopolist is unregulated.(1) What price will the firm charge to maximize its profits?(2) What is the level of consumer surplus at this price?b. Suppose the firmâ€™s price is regulated at $80.(1) What is the firmâ€™s marginal revenue if it produces 7 units?(2) If the firm is able to cover its variable costs at the regulated price, howmuch output will the firm produce in the short run to maximize its profits?539A Managerâ€™s Guide to Government in the Marketplace(3) In the long run, how much output will this firm produce if the priceremains regulated at $80?
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