MANAGERIAL/ECON+BUS/STR CONNECT ACCESS
9th Edition
ISBN: 2810022149537
Author: Baye
Publisher: MCG
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Question
Chapter 7, Problem 15PAA
To determine
HHI and four-firm concentration ratio of firms.
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Nationwide Bank has approached Hometown Bank with a proposal to merge. The following table lists the sales of the banks in the area. Use this information to calculate the four-firm concentration ratio and the Herfindahl-Hirschman index. Based on the FTC and DOJ Horizontal Merger Guidelines, do you think the Justice Department is likely to challenge the proposed merger?
Nationwide Bank has approached Hometown Bank with a proposal to merge. The following table lists the sales of the banks in the area. Use this information to calculate the Herfindahl-Hirschman index. Based on the FTC and DOJ Horizontal Merger Guidelines, do you think the Justice Department is likely to challenge the proposed merger?
Categorize each of the following examples as a horizontal, vertical, or conglomerate merger.
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- Determine whether each of the statements regarding the regulation of mergers in the United States is true or false by dragging the true and false labels into the correct bins The Department of Justice and the Federal Trade Commission are Answer Bank responsible for approving mergers and enforcing antitrust law false true Market definition is one of the main parts of current merger guidelines. The Federal Reserve oversees the enforcement of antitrust law Measure of concentration is one of the main parts of current merger guidelines. Mergers that result in a relatively high HHI are less likely to be approved than mergers resulting in a lower HHI. Firm diversification is one of the main parts of the current merger guidelinesarrow_forwardStep 1 of 2: Use the following table with the sample data to calculate the four-firm concentration ratio for the U.S. auto market. Round your answer to the nearest whole number if necessary. Market Shares in the U.S. Auto Market GM 18%18% Ford 16%16% Toyota 14%14% Chrysler 10%arrow_forwardBased on United States Census Bureau data for 2017, for the utilities (electricity and 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. Please give an explanation.arrow_forward
- PRICE (Dollars per can) 2.00 1.80 1.60 Demand 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0 0 MC = ATC MR 90 180 270 360 450 540 630 720 810 900 QUANTITY (Cans of beer) Monopoly Outcome $0.80 per can. Given this When they act as a profit-maximizing cartel, each company will produce 180 cans and charge information, each firm earns a daily profit of $144.00, so the daily total industry profit in the beer market is $288.00. Oligopolists often behave noncooperatively and act in their own self-interest even though this decreases total profit in the market. Again, assume the two companies form a cartel and decide to work together. Both firms initially agree to produce half the quantity that maximizes total industry profit. Now, suppose that Stargell decides to break the collusion and increase its output by 50%, while Schmidt continues to produce the amount set under the collusive agreement. Stargell's deviation from the collusive agreement causes the price of a can of beer to now $ , while Schmidt's…arrow_forward6. Deviating from the collusive outcome Mays and McCovey are beer-brewing companies that operate in a duopoly (two-firm oligopoly). The daily marginal cost (MC) of producing a can of beer is constant and equals $0.40 per can. Assume that neither firm had any startup costs, so marginal cost equals average total cost (ATC) for each firm. Suppose that Mays and McCovey form a cartel, and the firms divide the output evenly. (Note: This is only for convenience; nothing in this model requires that the two companies must equally share the output.) Place the black point (plus symbol) on the following graph to indicate the profit-maximizing price and combined quantity of output if Mays and McCovey choose to work together.arrow_forwardIn view of the empirical evidence, what factors do you think might be responsible for the current trends of increasing size and mergersarrow_forward
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