College Paper Writing Service-How do you think your answer might change if it became a monopolist with all of its competitors leaving the market? Or if it became an oligopoly with only one or two competitors?
For this problem use the Herfindahl Index to compute market concentration:
a. Suppose Apple has 45% of the U.S. market share for smartphones, followed by Samsung with 30%, LG with 9%, Motorola with 8%, HTC with 6%, and Nokia with 2%. What is the Herfindahl Index for the smartphone industry based on these numbers? Based on the Herfindahl Index, do you think the government would be willing to approve a merger between Apple and Samsung?
2. Use what you learned about perfect competition, monopoly, and oligopoly to answer these questions:
In the table below is the quantity produced, the price, the fixed costs, and variable costs for a perfectly competitive firm that faces a constant price of $150 for its product regardless of the quantity it sells. Use the information in the first four columns to calculate the number for the last four columns. At what quantity should they produce based on what you find with your results?
How do you think your answer might change if it became a monopolist with all of its competitors leaving the market? Or if it became an oligopoly with only one or two competitors?
3. You’ve read about the prisoner’s dilemma in the background readings. Suppose you are a business owner with just one main competitor. If neither you nor your competitor cut your prices, you will both be more profitable. However, if your competitor lowers its prices and you keep your prices high, then you will lose all of your sales to your competitor. Every month you and your competitor place advertisements in the local newspaper with your price – so you need to decide each month whether or not to keep prices high, or lower them based on what you think your competitor might do.
