1. What are the characteristics of monopolistic competition? (not monopoly!)Describe how hairdressers/stylists/salons in your area differentiate themselves from one another.

2.Oligopoly firms are less likely to compete with each other on price but rather on product proliferation and product differentiation. Describe how Kellogg's differentiates its cereals from those produced by General Mills. Note sources online or whether from direct in-store observation!

1. Calculate the Herfindahl-Hirshman index for
2. an industry consisting of four firms, each of which has an equal share in the market (show your work).
3. An industry consisting of 10 firms, each with an equal share of market sales.
4. An industry consisting of 100 firms with equal shares of sales.
5. State the general relationship between the competitiveness of an industry and the HHI.

1. In 1986, Pepsi announced its intention to buy 7-Up and Coca-Cola proposed buying Dr. Pepper.The year-end market shares in 1985 held by the largest firms in the industry were as follows:Coca Cola 38%;PepsiCo 29%;7-Up 6%;Dr. Pepper 5%;RJ Reynolds (Canada Dry & Sunkist) 3%;Royal Crown Cola 3%; P&G(Orange Crush & Hires Root Beer) 2%.The remaining firms share the last 14% of the market.Assume they each have a market share of 1%.
2. Calculate the HHI for the industry as structured at the end of 1985
3. Calculate the post-merger HHI if only PepsiCo had bought 7-Up
4. Calculate the post-merger HHI if only Coca Cola had bought Dr. Pepper
5. How would you expect the Justice Department to respond to each merger considered separately? Together? (Refer to Notes on Concentration Ratios)