3. With an estimated market share of 60%, Atlas is the dominant company and the price leader in an oligopolistic steel industry. The remaining market share is distributed equally between ten companies. Suppose that one of those ten companies, Norton, attempts to gain market share by undercutting the price set by Atlas. Calculate the "Four Firm Ratio" and Herfindahl-Hirschman Index "HHI" in the above described market and interpret your answer. What model can best resemble this market? Briefly explain this model. "1 VOW opinion, what Will be the effect of Norton's attempt described above on Atlas's market share: will it increase, decrease, or not affected at all? Justify your answer. 4. Jessie, a pharmacist, is planning on opening her own pharmacy. Jessie Pharmacy is expected to generate yearly revenue of $500,000. Jessie will run the pharmacy herself on full-time basis. Jessie's alternative employment options are as follows: - Continue to work as a senior medical representative for $50,000 per year. - Accepts a research position in another company for $70,000 per year. Jessie expects to spend $350,000 per year on purchasing drugs and cosmetics for resale to her customers. She will also need to hire three employees: an assistant, an accountant and a custodian, for whom the total salaries to be paid are expected to be $48,000 per year. Jessie owns the building in which her pharmacy is supposed to be; however, she could rent the pharmacy-store space out for $42,000 per year. Calculate Jessie's accou nting profit and economic profit. In your opinion, should Jessie proceed with opening her own pharmacy? Justify your answer. 5. Suppose you are the economic adviser of Jackie Brown Company, a perfectly competitive company that is suffering economic losses due to unforeseen continuous drop in the market price. Jackie Brown is a price taker; hence it cannot influence the market price, nor could it change production technology in the short run. You are asked to decide whether the company should shut down its operations or to continue to operate at a loss. Jackie Brown is selling 50 units of output per day, at a price of $20 per unit. The cost of raw material, direct labor, energy, and other variable inputs is about $24000 monthly. Unfortunately, an estimate of Jackie Brown fixed costs is currently unavailable. 50, what is your decision? Justi your answer. 6. Gillette and Schick are two of the dominant manufactures of disposable razors worldwide. Each firm can either sign or not sign an exclusive contract with Hugh Jackman to appear on their TV ads. If both companies manage to sign with Jackman, they will each make $7 million in economic profit. If only one of them signs, it earns $10 million in economic profit and the other firm incurs an economic loss of $1.5 million. If neither firm sign, they only make normal profit. Build the pay-off matrix for the above game. Identify "Nash Equilibrium", if any. Is this equilibrium optimal for both companies? Justify your
