MICROECONOMICS
21st Edition
ISBN: 9781260229431
Author: McConnell
Publisher: MCG
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Question
Chapter 21, Problem 2P
Sub Part (a):
To determine
Herfindahl-Hirschman index.
Sub Part (b):
To determine
Change in the Herfindahl index.
Sub part (c):
To determine
Change in market share and the Herfindahl index.
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6. The accompanying diagram shows the demand, marginal revenue, and marginal cost of a monopolist. (LO1, LO3, LO5)
a. Determine the profit-maximizing output and price.
b. What price and output would prevail if this firm’s product were sold by price-taking
firms in a perfectly competitive market?
c. Calculate the deadweight loss of this monopoly.
8. The elasticity of demand for a firm’s product is –2.5 and its advertising elasticity of demand is 0.2. (LO8)
a. Determine the firm’s optimal advertising-to-sales ratio.
b. If the firm’s revenues are $40,000, what is its profit-maximizing level of advertising?
Use the accompanying graph to answer the questions that follow. (LO1, LO2) a. 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 firm’s price is regulated at $80. (1) What is the firm’s marginal revenue if it produces 7 units? (2) If the firm is able to cover its variable costs at the regulated price, how much output will the firm produce in the short run to maximize its profits? (3) In the long run, how much output will this firm produce if the price remains regulated at $80?
5. (a) Assume that two firms A and B are in different industries (like computer software and computer hardware). What impact will a merger between these two firms have on the number of firms in each industry after the merger? Please give an explanation.
(b) Current automobile companies are facing a shortage of computers chips used in cars to run various parts of the car, and therefore supply of cars has decreased since a necessary part(s) is not available. If an auto company like General Motors (GM) decided to buy a chip manufacturing company to ensure that it did not face a chip shortage in the future, would such a purchase lead to more concentration in either the auto industry or the chip-manufacturing industry? Please give an explanationexplanation.
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