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Quasnou 9.1 The wholesale and retail hook markets in the United States have a fair amount of concentration. The three largest hook retailers {Barnes and

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Quasnou 9.1 The wholesale and retail hook markets in the United States have a fair amount of concentration. The three largest hook retailers {Barnes and Noble, Borders, and BooksA Million) all buy their books from Ingram. The market share (MS) of there t'mns and the average cost (AC) of their operations {relative to the list price ofa hook] is shown in the table below: Wholesale Books NOTES: a. Average cost is measured as a percentage of the list price ofthe hook. h. This is the additional average cost (MC) so the total average cost would he the input price for a hook plus the MC. From this we can infer that the minimum point of the average cost {AC} function oectlrs when a rm has 30% of the wholesale hook market. Furthermore, the minimum point of the additional average cost function {MC} occurs when a rm has 10% of the retail hook market. a. Calculate the HHI and C4 indices for the wholesale hook and retail hook markets. I b. If the current whoIESale market price for a hook is 50% the list price, what is the prot margin for the 11 hook wholesalers? H 1Would the HHI for the wholesale hook market increase or decrease in the longInn? Explain. c. What is the prot margin for each of the 63 book retailers if the retail market price Was 30% the list price {still assurning a wholesale market price of S'ii: of the list price}? I What would we expect to see happen in the retail book market irt the longrun? d. If Baker and Taylor merged with Bookazine. what would the change in HHI be for the wholesale book market? It Do you think the US. government would approve this merger".l Explain

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