Assignment 2
Business Economics
Course: EPGDM
Answer Any 3 questions. Each question carries 5 marks
1.
Forey, Inc., competes against many other firms in a industry. Over the last decade, several firms
have entered this industry and, as consequences, Forey is earning a return on investment that
roughly equals the interest rates. Furthermore, the four-firm concentration ratio and Herfindahl
Hirschman index are both quite small. Based on this information, which market structure best
characterizes the industry in which Forey competes? Explain the characteristics this market
structure and what happens to the Forey Inc’s profit in the short-run and long-run.
2.
Big Bird Air is legally obligated to purchase 50 jet engine from ERUS at the end of two years at
a price of $ 200000 per engine. Confident that it is protected from opportunism with this
contract, Big Bird begins making aircraft bodies designed to fit ERUS’s engines. Due to
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- Fall '16
- Economics, Big Bird, Big Bird Air
