Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN: 9781305506381
Author: James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher: Cengage Learning
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Question
Chapter 16, Problem 3E
A.
To determine
To ascertain:Whether the antitrust division challenge a merger between firms D and C.
B.
To determine
To ascertain:Whether the antitrust division challenge a merger between firms F and G.
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Students have asked these similar questions
Suppose an industry is composed of eight firms with the following market shares:A 30% E 8%B 25 F 5C 15 G 4D 10 H 3Based on the (revised 2010) merger guidelines, would the Antitrust Division likely challenge a proposed merger betweena. Firms C and D (assume the combined market share is 25 percent)?b. Firms F and G (assume the combined market share is 9 percent)? Explain your answer.
An industry is composed of Firm 1, which controls 70 percent of the market, Firm 2 with 15 percent of the market, and Firm 3 with 5 percent of the market. About 20 firms of approximately equal size divide the remaining 10 percent of the market. Calculate the Herfindahl-Hirschman Index before and after the merger of Firm 2 and Firm 3 (assume that the combined market share after the merger is 20 percent). Would you view a merger of Firm 2 with Firm 3 as procompetitive or anticompetitive? Explain.
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 16 Solutions
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
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- Firm Market Share (%) A 18 B 17 C 17 D 17 E 16 F 15 Refer to the data. Suppose that firms in this industry split up such that there were 20 firms, each with a 5 percent market share. The four-firm concentration ratio and the Herfindahl index respectively would bearrow_forwardTwo firms, A and B, compete in a Stackelberg duopoly with constant marginal costs of $10 for Firm A and $12 for Firm B. The market demand is given by Q = 100 - P. Determine the equilibrium output levels, market price, and profits for both firms, assuming Firm A is the leaderarrow_forwardIn the table below are data on five different industries and the market shares for each of the firms in the industry. Assume that there is no foreign competition, entry into the industry is difficult, and that no firm in each industry is on the verge of bankruptcy. Calculate the Concentration ration (CR4) and Herfindahl-Hirschman index (HHI) for each industry. Which industry has the most monopoly power and which industry has the least monopoly power based on HHI? If the sixth firm in the aviation industry sought to merge with the fifth firm in that industry, would the government be likely to challenge the merger? Find post-merger HHI and compare with pre-merger HHI Market Share of Firms in Industry (F) Industry F1 F2 F3 F4 F5 F6 Herfindahl index CR4 Aviation 25 20 15 15 15 10 Textiles 25 25 25 15 10 - Chemicals 40 15 15 15 15 - Computers 35 25 20 10 10 -…arrow_forward
- The market demand in a homogeneous-product Cournot duopoly is P = 100 - 2Q, where Q=Q1+Q2 (Firm 1 and Firm 2), and the costs functions for each firms are: TC1 = 12Q1 and TC2 = 20Q2. Instructions: Use no decimals. Use the average cost to calculate monopoly profits. Do not round if values are used to complete other calculations. Complete the following table. Q1 Q2 P Profits F1 Profits F2 Duopoly competition Collusionarrow_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_forwardThe tables below list the market shares held by the major firms in college dining hall and coffee shop industries. Calculate the four firm industry concentration ratio for each industry, then determine which industry is more concentrated. Concentration ratio ______% Concentration ratio _______%arrow_forward
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