Q2. Ten firms compete in a market in Dubai to sell drinking water. The total sales of all the firms are 2million dirhams. Ranking the firms' sales from highest to lowest, we find the top four firms' sales to be 260,000 AED, 220,000 AED, 150,000 AED and 130,000 AED respectively.

a)Calculate the four-firm concentration ratio in this market?

b)Comment on your finding in the above question. Is this market competitive?

Q3. A firm has 1.5 million dirhams in sales, a Lerner index of 0.57, and a marginal cost of 50 dirhams and competes against 800 other firms in its relevant market.

a)What price does this firm charge its customers?

b)By what factor does this firm mark up its price over marginal cost?

c)Do you think this firm enjoys much market power? Explain