Refer to Figure 5-6. Why is there a deadweight loss? A) ...

[c0205847]

Refer to Figure 5-6. Why is there a deadweight loss?
 
  A) because the marginal private cost for each additional unit between Q1 and Q2 exceeds the marginal private benefit
  B) because the marginal private benefit for each additional unit between Q1 and Q2 exceeds the marginal cost
  C) because the marginal social cost for each additional unit between Q1 and Q2 exceeds the marginal social benefit
  D) because the marginal social benefit for each additional unit between Q1 and Q2 exceeds the marginal cost

Question 2

Suppose that Firm ABC currently has a market share of 8 percent. Firm XYZ has a market share of 12 percent. What will happen to the Herfindahl-Hirschman index if the two firms merge? Show your work.
 
  What will be an ideal response?

[aprice35067]

Answer to Question 1

D

Answer to Question 2

The index will rise by (202) - (82) - (122) = 400 - 64 - 144 = 192 points.

[c0205847]

Gracias!

[kjohnson]

Excellent