Question 6:

You are the manager in a market composed of eight firms, each of which has a 12.5 percent market share. In addition, each firm has a strong financial position and is located within a 100-mile radius of its competitors.

Instruction: Enter your responses rounded to the nearest penny (two decimal places).

a. Calculate the premerger Herfindahl-Hirschman index (HHI) for this market.

_____________

b. Suppose that any two of these firms merge. What is the postmerger HHI?

_____________

c. Based only on the information contained in this question and on the U.S. Department of JusticeHorizontal Merger Guidelinesdescribed in this chapter, do you think the Justice Department would attempt to block a merger between any two of the firms?

• It likely will not.
• It likely will.
• It may, but will likely consider other factors as well.