Price ($) =500 300 100

Quantity/Month =

200 400

Market Structure =

Price =

Quantity =

Economic Profit =

Consumer Surplus =

Dead Weight Loss =

Competition =

Monopoly=

1.The following table illustrates the distribution of retail grocery sales in the Asheville, NC market:

Market

Retailer Share (%)

Kroger

35

26

Wal-Mart

Food Lion

12

Piggly Wiggly

8

IGA

7

The rest

4 each

a)Compute the four-firm concentration ratio (CR₄).

b)Compute the eight-firm concentration ratio (CR₈).

c)Compute the Herfindahl (H) index.

Two firms, A and B, have complete control of the supply of mineral water and both have zero costs. Their best reply functions (BRP) are given by:

q_A = 10 - .5q_B

q_B = 10 - .5q_A

a)Find the Cournot solution for the market price and output of mineral water and illustrate with a simple graph.

b)The (inverse) demand function facing a mineral water monopolist is given by:

P = 200 - 10Q

The marginal revenue (MR) function is, therefore, given by:

MR = 200 - 20Q

Assuming again that marginal and total costs are zero, demonstrate that firms A and B have an incentive to cooperate and maximize joint profits. That is, compare profits earned in Cournot equilibrium to a situation of joint monopoly.