Question.2974 - 1. Assume an industry is composed of the following eight firms.Company Market ShareFirm A 30 percentFirm B 25 percentFirm C 15 percentFirm D 10 percentFirm E 7 percentFirm F 6 percentFirm G 4 percentFirm H 3 percenta. If Firms B and C propose a merge, would the Antitrust Division likely challenge the merger? Why or why not? b. If firms G and H propose a merger, would the Antitrust Division likely challenge the merger? Why or why not?2. The widget Industry in Anytown is a monopoly, controlled by Widget Corp. Its demand curve for the local market is given by P = 800 – 20 W Where W represents the number of widgets sold per period. The total cost function (including opportunity or implicit costs) for Widget Corp. is TC = 300 + 500 W + 10 W 2 a. Assuming the industry is unregulated, what are the equilibrium price and output and economic profits earned by Widget Corp.? b. If the industry is regulated and the regulatory authority forces Widget Corp. to earn only a normal return on investment (which is included in its cost function), what is the resulting equilibrium price and quantity? c. What happens to consumer surplus? What happens t o the economic profits earned by Widget Corp.? 3. Discuss the various ways governments can handle externalities, such as noise from a local airport or a barking dog or building of commercial office space or an industrial building in a residential area? How does the assignment of property rights affect the outcome? Under what circumstances would a socially optimal solution arise without any government intervention? Under what circumstances would government intervention likely move the outcome closer to a socially optimal solution?
Answer Below:
Assume xx industry xx composed xx the xxxxxxxxx eight xxxxx Company xxxxxx ShareFirm x percentFirm x percentFirm x percentFirm x percentFirm x percentFirm x percentFirm x percentFirm x percenta xx Firms x and x propose x merge xxxxx the xxxxxxxxx Division xxxxxx challenge xxx merger xxx or xxx not xxx Herfindahl xxxxx before xxxxxx is xx Now xxxxxxx the xxxxx B xxx amp x merge xxxx the xxx Herfindahl xxxxx would xx or xxx agencies xxxxxxxxx consider xxxxxxx in xxxxx the xxx is xxxxxxx and xxxxxx to xx moderately xxxxxxxxxxxx and xxxxxxxx markets xx which xxx HHI xx in xxxxxx of xxxxxx to xx highly xxxxxxxxxxxx Since xxx HHI xx increasing xx more xxxx points xxx the xxxxxx is xxxxxx concentrated xxxx the xxxx Trust xxxxxxxx is xxxxxx to xxxxxxxxx the xxxxxx b xx firms x and x propose x merger xxxxx the xxxxxxxxx Division xxxxxx challenge xxx merger xxx or xxx not xxx Herfindahl xxxxx before xxxxxx is xx After xxx merger xxx new xxxxx would xx or xxxxx the xxxxxx in xxx is xxxx than xx is xxxxxxxx to xxxx an xxxxxxx competitive xxxxxxx and xxx Anti xxxxx Division xx less xxxxxx to xxxxxxxxx the xxxxxxxx The xxxxxx Industry xx Anytown xx a xxxxxxxx controlled xx Widget xxxx Its xxxxxx curve xxx the xxxxx market xx given xx P xxxxx W xxxxx W xxxxxxxxxx the xxxxxx of xxxxxxx sold xxx period xxx total xxxx function xxxxxxxxx opportunity xx implicit xxxxx for xxxxxx Corp xx TC x W x Assuming xxx industry xx unregulated xxxx are xxx equilibrium xxxxx and xxxxxx and xxxxxxxx profits xxxxxx by xxxxxx Corp x If xxx industry xx regulated xxx the xxxxxxxxxx authority xxxxxx Widget xxxx to xxxx only x normal xxxxxx on xxxxxxxxxx which xx included xx its xxxx function xxxx is xxx resulting xxxxxxxxxxx price xxx quantity x What xxxxxxx to xxxxxxxx surplus xxxx happens x o xxx economic xxxxxxx earned xx Widget xxxx Ans x If xx assume x is xxx quantity xxxx then xxxxxxx W- x Thus xx - x and xx WThus xxx profit xxxxxxxxxxxx quantity xxxxx be xx MR xx W x W x or x P x or xxxx the xxxxxxxxxxx quantity xxxxx be xxxxx at x price xx At xxxx price xxx profit xxxxx be x or x or x The xxxxxxxxxx should xxxx the xxxxxxxx profit xxxx TR-TC xx W- x ndash x W xx W x W x W x W- xx W xxx P xxxx is xxx equilibrium xxxxx and xxxxxxxx under xxxxxxxxxx c xxx consumer xxxxxxx increases xxx the xxxxxxxx profits xxx under xxxxxxxxxx Discuss xxx various xxxx governments xxx handle xxxxxxxxxxxxx such xx noise xxxx a xxxxx airport xx a xxxxxxx dog xx building xx commercial xxxxxx space xx an xxxxxxxxxx building xx a xxxxxxxxxxx area xxx does xxx assignment xx property xxxxxx affect xxx outcome xxxxx what xxxxxxxxxxxxx would x socially xxxxxxx solution xxxxx without xxx government xxxxxxxxxxxx Under xxxx circumstances xxxxx government xxxxxxxxxxxx likely xxxx the xxxxxxx closer xx a xxxxxxxx optimal xxxxxxxx The xxxx with xxxxx the xxxxxxxxxx can xxxxxx externalities xxx Taxation- xxx government xxx impose x tax xx the xxxxxx creating xxx externality xxx tax xxxx equal xxx private xxxx to xxx social xxxx which xxxx delete xxx external xxxxxxx of xxx transaction xxxxxxxx laws xxx regulations- xxx government xxx impose x law xx prohibit xxx entity xxxxx may xx involved xx creating xxx externality xxxxxxxx allowances- xx this xxx government xxxxxxx a xxxxx up xx which x certain xxxxxxxxxxx can xxxxx negative xxxxxxxxxxxxx The xxxxxxxxxx of xxxxxxxx rights xxxx in xxxxxxxxx a xxxxx to xxx externality xx order xx value xx the xxxxxxxxxxx For xxxxxxx if xxx steel xxxx owns xxx rights xxxx the xxxxxxxxxxx that xxxx around xxx millwill xx willing xx pay xxx steel xxxx not xx produce--up xx the xxxx that xxxx are xxxxxxxxx from xxxxxx care xxxxxxx aesthetic xxxxxx of xxx air xxx This xxxxxx that xxxx are xxxxxxx to xxx becomes xx opportunity xxxx for xxx steel xxxx if xxxx produce xxxx they xxxx cut xxxxxxxxxx to xxx optimal xxxxx On xxx other xxxx if xxx people xxx the xxx then xxx steel xxxx would xxxx to xxx them xxxx same xxxxxx for xxx right xx produce xxxx the xxxxxxxx externality xx directly xxxxx to xxx steel xxxx amp x marginal xxxx This xxx help xx solving xxx problem xxxxxxx government xxxxxxxxxxxx If xxxxxx of xxx party xxxxx creating xxx negative xxxxxxxxxxx or xxx one xxxxxxxx is xxx ready xx come xxxx to x mutual xxxxxxxxx then xxx government xxx to xxxxxxxxxMore Articles From Economics
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