MANAGERIAL/ECON+BUS/STR CONNECT ACCESS
9th Edition
ISBN: 2810022149537
Author: Baye
Publisher: MCG
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Question
Chapter 7, Problem 2CACQ
a
To determine
Herfindahl-Hirschman index (HHI) index of industry is to be ascertained.
b)
To determine
The four firm concentration ratio is to be calculated.
c)
To determine
Whether Department of Justice may block horizontal merger of two firms.
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Based 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.
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.
Q4
Industries X (production of plastic sheds in Canada) and Y (production of cardboard in Canada) both have four-firm concentration ratios of 16 percent, but the Herfindahl index for X is 102, while that for Y is 95. These data suggest
Multiple Choice
both industries are strongly oligopolistic.
both industries are experiencing diminishing returns.
greater market power in Y than in X.
greater market power in X than in Y.
that price competition is stronger in X than in Y.
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