chap014 - Chapter 14: Answers to Questions and Problems 1....

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Chapter 14: Answers to Questions and Problems 1. a. 2,000. b. 2,800. c. Yes. Both the pre-merger HHI and change in HHI exceed those specified in the guidelines. 2. a. i. About $125. ii. Approximately $281.25 (computed as .5[7.5][$200 - $125] = $281.25). b. i. $80. ii. 12 units. iii. 0 units, since the firm would earn a loss by operating at the regulated price. 3. a. Set P = MC External + MC Internal to get 100 - 5Q = 30Q. Solving yields Q = 100/35 units. b. Set P = MC Internal to get 100 - 5Q = 20Q. Solving yields Q = 100/25 units. c. Set MR = MC Internal to get 100 - 10Q = 20Q. Solving yields Q = 100/30 units. d. Pollution taxes or permits. 4. a. 8 units. b. $12 per unit. c. i. No. The socially efficient level would be 12 units. ii. Workers 1 and 2 get surplus of $32, while worker 3 gets surplus of $128. 5. a. Set MR = MC to get 25 – 2Q = 5. Solve to obtain Q = 10 and P = $15. b. Set P = MC to get 25 – Q = 5. Solve to obtain Q = 20 and P = $5. c. Monopoly profits, which are ($15 - $5)10 = $100. 6. a. Note that Q S = Q SF + Q SD = 300 + 0.5P. Setting this equal to domestic demand yields 300 + 0.5P = 500 – 1.5P. Solving yields P = 100 and Q = 350 units. b. Setting total supply under the quota to total demand yields 150 + 0.5P = 500 – 1.5P. Solving yields P = $175 and Q = 237.5 units. c. Worse off. d. Better off. Managerial Economics and Business Strategy, 7e Page 1
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chap014 - Chapter 14: Answers to Questions and Problems 1....

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