Economics (Irwin Economics)
21st Edition
ISBN: 9781259723223
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 14.2, Problem 3QQ
To determine
Relevance of elasticity.
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Assume the laptop market has 5 participants, each accounting for 20% of market share. Now two of the competitors decide to merge, how would this change the HH index? Would the proposed deal likely raise FTC’s concerns on reduced competition?
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b.
Increase by 400. Yes.
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Increase by 800. No.
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Chapter 14 Solutions
Economics (Irwin Economics)
Ch. 14.2 - Prob. 1QQCh. 14.2 - The D2e segment of the demand curve D2eD1 graph...Ch. 14.2 - Prob. 3QQCh. 14.2 - Prob. 4QQCh. 14 - Prob. 1DQCh. 14 - Prob. 2DQCh. 14 - Prob. 3DQCh. 14 - Prob. 4DQCh. 14 - Prob. 5DQCh. 14 - Prob. 6DQ
Ch. 14 - Prob. 7DQCh. 14 - Prob. 8DQCh. 14 - Prob. 9DQCh. 14 - Prob. 10DQCh. 14 - Prob. 11DQCh. 14 - Prob. 12DQCh. 14 - Prob. 13DQCh. 14 - Prob. 14DQCh. 14 - Prob. 1RQCh. 14 - Prob. 2RQCh. 14 - Prob. 3RQCh. 14 - Prob. 4RQCh. 14 - Prob. 5RQCh. 14 - Prob. 6RQCh. 14 - Prob. 7RQCh. 14 - Prob. 8RQCh. 14 - Prob. 9RQCh. 14 - Prob. 10RQCh. 14 - Prob. 1PCh. 14 - Prob. 2PCh. 14 - Prob. 3P
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- 10.7. Cost reduction and the Herfindahl and Lerner indexes. Consider an industry where demand has constant price elasticity and firms compete in output levels. In an initial equilibrium, both firms have the same marginal cost, c. Then Firm 1, by investing heavily in R&D, manages to reduce its marginal cost to c′ , c; a new equilibrium takes place. (a) What impact does the innovation have on the values of H and L? (b) What impact does the innovation have on consumer welfare? (c) What do the previous answers have to say about L as performance measure?arrow_forwardA firm has #1.5million in sales, a Lerner index of 0.57, a marginal cost of #50, and competes against 800 other firms in its relevant market. a. What price does this firm charge its customers. b. By what factor does this firm mark up its price over marginal cost c. Do you think this firm enjoys much market power? Explain.arrow_forwardT or F Market concentration measures fail to accurately assess the industry's market power. Why?arrow_forward
- Market Structure Number of Firms Type of Product Sold Price Taker? Price Formula Freedom of Entry? Short-run Profit? Long-run Profit? Industry Examples Perfect Competition Choose an item. A.infinite B.many C.Few dominante firms D.One Choose an item. A.Unique B.differentiated C. Identical D.Differentiated or identical Choose an item. A.yes B. NO Choose an item. A.P=MC B.P>MC C.P<MC Choose an item. A. YES B.NO Choose an item. A.YES B.No Choose an item. A. Yes B. No [Insert two to three example industries that meet the criteria of the market structure.] Monopolistic Competition Choose an item. A. Infinte B.Many C. Few dominant firms D. One Choose an item. A. Unique B.Differentiated C. Identical D.Differentiated or Identical Choose an item. A. Yes B. No Choose an item. A.P=MC B.P>MC C. P<MC Choose an item. A. Yes B NO…arrow_forwardA country’s market for new motor vehicles is dominated completely by two firms, Fastcars Ltd and Slowcars Ltd. Market revenue is fixed at $10 billion. Each firm can choose whether to advertise. Advertising costs $1 billion for each firm that advertises. If one firm advertises and the other does not, then the firm that advertises receives 100% of market revenue and pays for its advertising. If both firms advertise, they split the market revenue 50:50 and pay for their respective advertising. If neither advertises, they split the market revenue 50:50 but without the expense of advertising. a) What strategy would you advise that Fastcars Ltd should follow? b) What would you predict will be the strategy chosen by each firm? c) Is there an outcome that would make both firms better off? In case you find that there is such an outcome, is it achievable?arrow_forwardA firm has $1.5 million in sales, a Lerner index of 0.57, and a marginal cost of $50, and competes against 800 other firms in its relevant market. a) What price does this firm charge its customers? b) By what factor does this firm mark up its price over marginal cost? c) Do you think that this firm enjoys much market power? Explain.arrow_forward
- Respond to the question with a concise and accurate answer, along with a clear explanation and step-by-step solution, or risk receiving a downvote Market Structure P Q R S Characteristics of Market Structures Influence over Price Some Extensive None Limited Number of Firms in Industry Few One Many Many Perfect Competition What market structure does the letter "S" in the table represent? Monopolistic Competition O Oligopoly O Monopoly D Question 20 Entry into Market Difficult O special interest lobbies Almost Impossible Easy Easy negative externalities. The private market will not provide enough of a pure public good because of public choice not to produce the good (arrow_forwardAntitrust enforcement is controversial mainlybecausea. cooperative domestic firms are best equipped todeal with international competitors.b. some business practices that seemanticompetitive may in fact have legitimatepurposes.c. excessive competition can drive some firms out ofbusiness, causing job losses.d. vigorous enforcement can reduce businessprofitability, lowering shareholder value.arrow_forwarda) The presence of network effects implies: (i) Higher barriers to exit for users, and higher barriers to entry for new competitors (ii)Higher margins in at least one market (iii)Tipping toward winner-take-all markets (iv) (i), (ii) and (iii) (v) (i) and (iii) onlyarrow_forward
- a) What is a tie-in contract and how does that differ from bundle pricing? b) What is a conglomerate merger and why are they more likely to be approved? c) Limit pricing is a strategy where a firm sets a low, but profitable, price to discourage entry. How does that differ from predatory pricing?arrow_forwardwhat pricing approach is it when a high school basketball team offers discounts to students, alumni or faculty? - (they can purchase them cheaper then others) 1. Bundling 2.Peak Load Pricing 3.Indirect Segmentation Price Discrimination 4.Direct Segmentation Price Discrimination 5.Complete Price Discriminationarrow_forwardA firm has $2,100,000 in sales, a Lerner index of 0.57, and a marginal cost of $40, and competes against 1000 other firms in its relevant market.Instruction: Enter your responses rounded to two decimal places.a. What price does this firm charge its customers? $ b. By what factor does this firm mark up its price over marginal cost? $arrow_forward
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