MyLab Economics with Pearson eText -- Access Card -- for Principles of Microeconomics
17th Edition
ISBN: 9780134081168
Author: CASE, Karl E.; Fair, Ray C.; Oster, Sharon E.
Publisher: PEARSON
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Chapter 13, Problem 2.8P
To determine
Impact of banning paid prioritization.
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Refer to Figure 15-5.
Part a) A profit-maximizing monopoly's profit is equal to:
a)
P2 x Q3.
b)
(P2-P4) x Q3.
c)
(P1-P6) x Q1.
d)
(P2-P5) x Q3.
Part b)
A profit-maximizing monopoly will produce an output level of
a)
Q3.
b)
Q4.
c)
Q2.
d)
Q1.
Part c)
A profit-maximizing monopoly will charge a price of
Question 22 options:
a)
P2.
b)
P4.
c)
P1.
d)
P3.
Based on United States Census Bureau data for 2017, for the utilities (electricity & gas) industry the four firm concentration ratio (C4) is 16.2 percent and the Herfindahl-Hirschman index is 161.4. Why might the actual concentration, and therefore market power enjoyed by a specific utility company in a state, be greater than what is indicated by these numbers? These ratios are calculated for the entire country, and not for a specific city or state. Explain & show work.
Antitrust laws
Cooperation among oligopolies runs counter to the public interest because it leads to underproduction and high prices. In an effort to bring resource allocation closer to the social optimum, public officials attempt to force oligopolies to compete instead of cooperating.
Consider the following scenario:
Suppose that the presidents of two auto manufacturing companies exchange text messages in which they discuss jointly raising prices on their new lines of hybrid SUVs.
This illegal communication would violate which of the following laws?
The Clayton Act of 1914
The Celler–Kefauver Act of 1950
The Sherman Antitrust Act of 1890
The Robinson–Patman Act of 1936
Chapter 13 Solutions
MyLab Economics with Pearson eText -- Access Card -- for Principles of Microeconomics
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- Suppose that in the fast-food restaurant industry the four largest restaurants account for 30 %, 20%, 15%, and 5% of the market share, respectively, and the 10 other small restaurants each account for 3%. If two of the 10 small restaurants merged, other things being equal, what would be the four-firm concentration ratio (CR) and the Herfindahl-Hirschman index (HHI), respectively? Select one: a. 70% 1640 b. 70%; 1658 C. 71%; 1640 d: 71%; 1658arrow_forwardPlease, write a 10 sentence (maximum) essay on how you could use the Herfindahl-Hirschman index to analyze changes in market concentration in your chosen industry/market (what data would you collect, how would you use the data to draw conclusions about market concentration).arrow_forwardAn industry consists of three firms with sales of $200,000, $500,000, and $400,000. a. Calculate the Herfindahl-Hirschman index (HHI). Instruction: Enter your response rounded to the nearest integer. b. Calculate the four-firm concentration ratio (C4). c. Based on the FTC and DOJ Horizontal Merger Guidelines described in the text, is the Department of Justice likely to attempt to block a horizontal merger between two firms with sales of $200,000 and $400,000? O Yes O No Note:- Please refrain from offering handwritten solutions. Please ensure that your response maintains accuracy and quality to avoid receiving a downvote. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forward
- I am intrigued by the following article detailing how Nestle agreed to pay Starbucks $7.2B to distribute and sell Starbucks’ packaged coffees and teas around the world. Why would Nestle purposely put its competitors’ brands right next to it in the store, and then pay them for the privilege? Why wouldn’t Starbucks just take care of distributing its own brands rather than go through Nestle? Please explain how this outcome could be profit maximizing for both firmsarrow_forwardTelecommunications lobbied both parties to pass the 1996 Telecommunications act which essentially handed near-monopoly control of the media to ____ corporations.arrow_forwardAccording to the Federal Trade Commission, “Many mergers benefit competition and consumers by allowing firms to operate more efficiently. But some mergers change market dynamics in ways that can lead to higher prices, fewer or lower-quality goods or services, or less innovation.” Antitrust laws often allow the former pro-competitive types of mergers, but prohibit the latter anti-competitive types. Suppose that one looks over the historical record of antitrust enforcement and finds that while the authorities have permitted some mergers and blocked others, the industry’s average price has tended to fall whenever a merger has been permitted and occurred. a) Based solely on the information provided above, is it correct then to infer that the antitrust authorities should have been more lenient and permitted more mergers? Why or why not? b) Based solely on the information in the question, is it likely that these merged firms sell products that are substitutes or complements? Whyarrow_forward
- Why should the government strictly regulate internet oligopolies to reduce the abuses of market power that cause inefficient and unfair market outcomes? List 3 reasonsarrow_forwardConsider a remote town in which two restaurants, All-You-Can-Eat Café and GoodGrub Diner, operate in a duopoly. Both restaurants disregard health and safety regulations, but they continue to have customers because they are the only restaurants within 80 miles of town. Both restaurants know that if they clean up, they will attract more customers, but this also means that they will have to pay workers to do the cleaning. If neither restaurant cleans, each will earn $11,000; alternatively, if they both hire workers to clean, each will earn only $8,000. However, if one cleans and the other doesn't, more customers will choose the cleaner restaurant; the cleaner restaurant will make $16,000, and the other restaurant will make only $4,000. Complete the following payoff matrix using the previous information. (Note: All-You-Can-Eat Café and GoodGrub Diner are both profit-maximizing firms.) If All-You-Can-Eat Café and GoodGrub Diner decide to collude, the outcome of this game…arrow_forwardProvide an example of a company which operates on market as two one- sided platforms, describe sides and network effects.arrow_forward
- Consider a remote town in which two restaurants, All-You-Can-Eat Café and GoodGrub Diner, operate in a duopoly. Both restaurants disregard health and safety regulations, but they continue to have customers because they are the only restaurants within 80 miles of town. Both restaurants know that if they clean up, they will attract more customers, but this also means that they will have to pay workers to do the cleaning. If neither restaurant cleans, each will earn $13,000; alternatively, if they both hire workers to clean, each will earn only $10,000. However, if one cleans and the other doesn't, more customers will choose the cleaner restaurant; the cleaner restaurant will make $18,000, and the other restaurant will make only $6,000. Complete the following payoff matrix using the information just given. (Note: All-You-Can-Eat Café and GoodGrub Diner are both profit-maximizing firms.) GoodGrub Diner Cleans Up Doesn't Clean Up All-You-Can-Eat Café Cleans Up , ,…arrow_forwardA few years ago, US antitrust officials faced the following case. Nestle, producers of Haagen-Dazs wanted to merger with Dreyers, another producer of what is called “superpremium” ice cream. Those opposing the merger pointed about the combined market share of Nestles and Dreyers would be 56% so that along with Unilever, producer of Breyers and Ben&Jerrys, three firms would sell 97% of this half-billion dollar market. Those in favor of the merger countered that the total supermarket ice cream sales are much greater, in excess of $1 billion because consumers can choose non-superpremium ice cream in which Nestle and Dreyer would command only 22% of the market and Unilver an additional 21%. What is the best way to measure the market for ice cream: superpremium or all supermarket ice cream? Should the merger have been allowed?arrow_forwardExplain why the cost structure associated with many kinds of information goods and services might imply a market supplied by a small number of large firms. (At the same time, some Internet businesses such as grocery home deliveries have continually suffered steep losses regardless of scale. Explain why.) Could lower transaction costs in e-commerce ever make it easier for small suppliers to compete? As noted in the previous chapters, network externalities are often an important aspect of demand for information goods and services. (The benefits to customers of using software, participating in electronic markets, or using instant messaging increase with the number of other users.) How might network externalities affect firm operating strategies (pricing, output, and advertising) and firm size?arrow_forward
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