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Suppose firms in the steel industry have the following market shares: 52%, 19%, 10%, 7%, and...

Suppose firms in the steel industry have the following market shares: 52%, 19%, 10%, 7%, and 6 firms with 2%.

1. Calculate CR4 and H for this industry.

2. If the third and fourth largest firms merge (ceteris paribus), what is the new CR4 and H?

3. Fiberglass is often used by auto manufacturers as a parts alternative to steel. Suppose as the price of fiberglass rises by 8%, sales of steel rise by 6.5%. What is the cross-price elasticity of demand between these goods? What does this information imply about the relevant market? Should we be more concerned or less concerned about a merger of two fiberglass producers given this information? Explain.       

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Expert Solution

Rahul Sunny answered 1 year ago
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