QUESTION 9.] The wholesale and retail book markets in tlte United States have a fair amount of concentration. The three largest book retailers (Barnes and Noble, Borders, and BooksA Million) all bu}.r their books from Ingram. The market share (MS) of these rms and the average cost (AC) of their operations (relative to the list price of a hook) is shown in the table below: Wholesale Books Retail Books Firm MS AC" Firm MS AAC" Ingram 0.30 0.40 Barnes and 0.15 0.25 Noble Baker and 0.20 0.45 Borders 0.10 0.20 Taylor Bookazine 0.10 0.60 Books-A 0.05 0.25 Million Others (8 0.05 each 0.7125 Others [60 0.01 each 0.362 Firms} firms) NOT ES: a. Average cost is measured as a percentage of the list price of the book. b. This is the additional average cost (AAC) so the total average cost would be the input price for a book plus the MC. From this we can infer that the minimum point of the average cost (AC) function occurs when a rm has 30% of the wholesale book market. Furthermore, the minimum point of the additional average cost function (AAC) occurs when a rm has 10% of the retail hook market. a. Calculate the HHI and C 4 indices for the wholesale book and retail book markets. H b. If the current wholesale market price for a book is 50% the list price. what is the prot margin for the 1] book wholesalers? Would the HHI for the wholesale book market increase or decrease in the longrun? Explain. c. What is the prot margin for each of the 63 book retailers if the retail market price was 80% the list price (still assuming a wholesale market price of 50% of the list price)? Isl What would we expect to see happen in the retail book market in the longrun? d. If Baker and Taylor merged with Bookazine, what would the change in HH] be for the wholesale book market? It Do you think the U.S. government would approve this merger? Explain