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In: Economics

An industry consists of three firms with sales of $205,000, $745,000, and $305,000. a. Calculate the...

An industry consists of three firms with sales of $205,000, $745,000, and $305,000. a. Calculate the Herfindahl-Hirschman index (HHI). Instruction: Enter your response rounded to the nearest integer. b. Calculate the four-firm concentration ratio (C4). c. Based on the FTC and DOJ Horizontal Merger Guidelines described in the text, is the Department of Justice likely to attempt to block a horizontal merger between two firms with sales of $205,000 and $305,000? Yes No

Solutions

Expert Solution

Sale of Firm 1=$205,000

Sale of Firm 2=$745,000

Sale of Firm 3=$305,000

Part a) and Part b) are handwritten.

c) Yes, based on the FTC and DOJ Horizontal Merger Guidelines described in the text, the Department of Justice is likely to attempt to block a horizontal merger between two firms with sales of $205,000 and $305,000, because, if these two firms are merged, adding up their individual sales ($205,000+$305,000)=$510,000 are still below the individual sale of firm 2 having sales of $745,000. The merger of firm 1 and firm 2 will not be able to increase competition in the market and firm 2 will continue to have its monopoly or a larger share in the market. So the purpose of removing monopoly in the market will not be met.

Rahul Sunny answered 6 months ago
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