1.

(a) If there are only three firms in an industry in a country, then what would the four firm concentration ratio (C4) for this industry be equal to? Please show your calculations.

(b) There is only one firm in the United States (Boeing) that manufactures large passenger aircraft (large passenger aircraft is defined as aircraft that can transport more than 150 passengers). The C4 for this industry would therefore be 1 as C4 is based on only US data. Why might Boeing face some competition in the market for large passenger aircraft even though the C4 would imply that Boeing faces no competition at all? Please give an explanation.

2.

An industry is comprised of 20 firms, each with an equal market share (each firm's market share is(1/20) of the total market for the product produced in that industry).

(a) Please calculate the four-firm concentration ratio (C4) of this industry and show your calculations.

(b) Please calculate the Herfindahl-Hirschman index (HHI) and show your calculations.

3.

The industry elasticity of demand for gadgets is 2, while the elasticity of demand for an individual gadget manufacturer's product is 2.

(a) Please calculate the Rothschild index for this industry and show your calculations.

(b) Based on your answer in (a) would you say that there are many substitutes for gadgets in the industry? Please explain.

4.

(a) If Ford (a manufacturer of cars) mergers with Goodyear (a manufacturer of automobile tires) would that be considered a horizontal or vertical merger. Please explain.

(b) Will this merger between Ford and Goodyear lead to an increase in concentration in either the car manufacturing industry or in the automobile tire manufacturing industry? Please explain.