There are six firms in the industry. Suppose their sales in the year 2006 are as
Firm Sales (10 millions of dollars)
1. What is the concentration ratio in the industry
(a) if you use the four-firm concentration ratio;
(b) if you use the HHI index.
2. Would you regard this industry as oligopolistic? Why or why not?
3. Suppose that firm A merges with firm F. What now will be the concentration ratio in the industry?
4. Suppose that after they merge, firms A and F go out of business. What now will be the concentration ratio in this industry?© BrainMass Inc. brainmass.com October 25, 2018, 4:40 am ad1c9bdddf
The concentration ratio of an industry is used as an indicator of the relative size of firms in relation to the industry as a whole. Here we have a total industry worth 330 million. The top four firms control 270 million, which is 82%. ...
Determination of market structure based on concentration ratios and mergers in the solution.
Economics of Merger
An industry consists of 6 firms, with sales of $100,000, $500,000, $400,000, $300,000, 60,000, and $75,000. Now, suppose the two smallest firms merge.
a. Calculate the four-firm concentration ratio (C4) before the merger. Show your work.
b. Calculate the four-firm concentration ratio (C4) after the merger. Show your work.
c. Calculate the Herfindahl-Hirschman index (HHI) before the merger. Show your work.
d. Calculate the Herfindahl-Hirschman index (HHI) after the merger. Show your work.
e. Do you think the U.S. Department of Justice would try to block the merger?