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    Monopoly and Monopolistic

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    Monopoly and Monopolistic Competition
    DQ1. There are four firms in an industry with the following market shares:

    Firm 1 30%

    Firm 2 25%

    Firm 3 25%

    Firm 4 20%

    a) Calculate the Herfindahl Hirschman Index for the industry.

    b) What is the number of effective competitors in this market? Show your calculation.

    DQ 2. Suppose the demand curve for a monopolist is given as:

    Qd = 500- P

    MR = 500 - 2Q

    The monopolist has a constant marginal and average total cost of $50 per unit.

    a) Determine the monopolist's profit-maximizing price and output.

    b) Calculate the monopolist's profit.

    c) What is the Lerner Index for the industry?

    DQ 3. There are two industries, A and B; and each industry consists of four firms. However, each of the four firms in industry A has a 25% market shares while those firms in industry B have 80% 10%, 5% and 5% market respectively..

    a) Calculate the three- and four-firm concentration ratios for each industry.

    b) Calculate the Hirfindahl Hirschman Index for each industry.

    c) Are these industries equally concentrated? Explain your answer.

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    Monopoly and Monopolistic Competition
    DQ1. There are four firms in an industry with the following market shares:

    Firm 1 30%

    Firm 2 25%

    Firm 3 25%

    Firm 4 20%

    a) Calculate the Herfindahl Hirschman Index for the industry.
    HHI = .3^2 + .25^2 *2 + .2^2 = 0.255

    b) What is the number of effective competitors in this market? Show your calculation.
    Inverting the HHI provides us with the number of competitors which are affecting the market:
    1/0.255 = 3.9 or about 4 firms.

    DQ 2. Suppose the demand curve for a ...

    Solution Summary

    Market structure and profit maximization

    $2.19