W5_Practice_Problem_1

# W5_Practice_Problem_1 - Complete Problem 2 5 6 15 18 and...

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Complete Problem # 2, 5, 6, 15, 18, and 19 (p. 258-262) 2) An industry consists of three firms with sales of \$200,000, \$500,000, and \$400,000 a) Calculate the Herfindahl-Hirschman Index (HHI) Decimal Breaker: 10000 Total Sales: \$1,100,000.00 = 200000+500000+400000 0.0330578512 0.1818181818 0.0330578512 0.2066115702 0.4545454545 0.2066115702 0.132231405 0.3636363636 0.132231405 Sum Total: 0.3719008264 0.3719008264 HHI = 10000(0.0330+0.2066+0.1322) HHI = 3719.0082644628 3719.0082644628 b) Calculate the four-firm concentration ratio (C4) Four-Firm Concentration Ratio: 1.00 c) Based on the FTC and DOJ Horizontal Merger Guidelines described in the text, do you think the Department of Justice woud attempt to block a horizontal merger between two firms with sales of \$200,000 and \$400,000? Explain. Decimal Breaker: 10000 Total Sales: \$1,100,000.00 = 200000+500000+400000 0.2975206612 0.5454545455 0.2975206612 0.2066115702 0.4545454545 0.2066115702 Sum Total: 0.5041322314 0.5041322314 HHI = 10000(0.2975+0.2066) HHI = 5041.3223140496 5041.3223140496 5) Evaluate the following statement: "Managers should specialize by acquiring only the tools needed to operate in a particular market structure. That is, managers should specialize in managing either a perfectly competitive, monopoly, monopolistically competitive, or oligolpoly firm" 6) Under what conditions might the Justice Department approve a merger between two companies that operate… 15) Nationwide Bank has approached Hometown Bank with a proposal to merge. The following table lists the sales of the banks in the area…

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