Author Question: A market has ten firms, whose market shares are given in the table above. a) If firms I and J ... (Read 122 times)

jazziefee · **on:** Jun 29, 2018

A market has ten firms, whose market shares are given in the table above.

a) If firms I and J wanted to merge, according to the Department of Justice guidelines, would the Department of Justice challenge the merger? b) If firms A and B wanted to merge, according to the Department of Justice guidelines, would the Department of Justice challenge the merger?

Question 2

Roxie's Movie Theatre has a monopoly and discovers that at 12 a movie, no one is buying movie tickets during weekdays. Roxie's conducts a survey and the table above reveals the results of the survey.

Roxie decides to price discriminate between weekend and weekday moviegoers. The marginal cost of a showing a movie is 6. Roxie's charges ________ on weekdays and ________ on weekends. A) 9; 12
B) 6; 15
C) 6; 18
D) 3; 12

todom5090 · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

a) The decision whether to challenge the merger depends, in part, on the market's Herfindahl-Hirschman Index (HHI). The HHI for the market initially is 1,150. Thus the Department of Justice guidelines say it will challenge a merger if the merger raises the HHI by 100 or more points. If firms I and J merge, the HHI becomes 1,200. The Department of Justice will not challenge this merger.
b) If firms A and B merge, the HHI becomes 1,600. The Department of Justice will challenge this merger.

Answer to Question 2

A