1. Suppose each of the 50 states in the United States had only one gasoline station, and all stations were the same size (sales were the same in each gas station).

(a) Please calculate the four-firm concentration ratio for the state of New York and show your calculations.

(b) Please calculate the four-firm concentration ratio for the entire country and show your calculations.

(c) Please calculate the Herfindahl-Hirschman index for the state of New York and show your calculations.

(d) Please calculate the Herfindahl-Hirschman index for the entire country and show your calculations.

2. The following table lists the sales of the banks in the area.

Bank Name Sales

MegaBank 1,100

City Bank 950

Nationwide Bank 845

Atlantic Bank 785

Bulk Bank 665

Metropolitan Bank 480

American Bank 310

Hometown Bank 260

Urban Bank 140

(a) Please calculate the Herfindahl- Hirschman index and the 4-firm concentration ratio.

(b) Assume that Hometown Bank and Urban Bank, being the two smallest banks in the region, decide to get together and merge. After the merger, what is the 4-firm concentration ratio and the Herfindahl-Hirschman index. Please show your calculations.

(might be easier to solve in Excel)

(c) Is the government more likely to object to the merger analyzed in (b) or a merger between MegaBank and City Bank? Please explain, without calculating any further ratios.

3. How does the improvement and progress of technology affect concentration in an industry? Please give an explanation.

4. Would a merger between Microsoft and Intel be a horizontal or vertical merger? Please explain.