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# 14 (4 you think the Federal Trade Commission or Justice Department

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14. (4 you think the Federal Trade Commission or Justice
Department would challenge this proposed merger?
Explain why or why not. The following data shows total
cost and demand information for Jon?s Riding Mowers.
Unit Pike >300 800 750 700 650 600 550 500 450 400 350
Units Demanded 0 1 2 3 4 5 6 7 8 9 10 Total Cost \$200
\$500 \$700 \$800 \$850 \$950 \$1150 \$1450 \$1350 \$2350
\$2950 15. (2 points) What is Jon?s fixed cost? 16. (8
points) the AFC, AVC, and profit per unit if Jon sets the
price at S600. 17. (5 points) What is the profit-maximizing
price and sales level for riding mowers? 18. (5 points) If
total costs at each output level were to double, would the
profit maximizing output level be greater or smaller than
that calculated in Question 17? Can you answer this
question without performing any calculations? Explain
Directions: Please answer the questions in the space
provided Points for each question are shown in
parentheses. Refer to the pie chart shown here for
questions 11-14, which are about the US cereal market
Assume that the wedge marked ?Private Label? represents
the combined market share of several manufacturers, and
therefore, Quaker is the fourth largest cereal producer.
11. (4 points).Calculate the 4-fmn concentration ratio for
the US cereal industry 12. (6 the HHI for the U.S. cereal
industry, ignoring the contribution of all but the four largest
firms. (Please show the calculations and the total.) 13. (6
that Kellogg were to make an offer to buy Kraft?s cereal
brands. Calculate the new HHI after the proposed buyout,
assuming that the competitors? shares would be
unaffected by the merger (Once again, please show your
calculations.)

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Solution
Hi,
Please find the correct answer as folows:
11. 4-firm concentration ratio = 31%+34%+14%+10%
=89%
---------
12. HHI Index of the 4 firms = 34^2+31^2+14^2+10^2
=2413
--------
13. New HHI = 48^2+31^2+10^2
=3365
---------
14. Yes, Federal Trade Commission would challenge the
merger as it would tend to create a monopoly
--------
15. John\'s fixed cost = \$200
---------
16. Fixed cost = \$200
Variable cost = \$950-200
=\$750
Profit = 600*5-950

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14. (4 you think the Federal Trade Commission or Justice Department would challenge this proposed merger? Explain why or why not. The following data shows total cost and demand information for Jon?s Riding Mowers. Unit Pike >300 800 750 700 650 600 550 5 00 450 400 350 Units Demanded 0 1 2 3 4 5 6 7 8 9 10 Total Cost \$200 \$500 \$700 \$800 \$850 \$950 \$1150 \$1450 \$1350 \$2350 \$2950 15. (2 points) What is Jon?s fixed cost? 16. (8 points) the AFC, AVC, and profit per unit if Jon sets the price at S600. 17. (5 points) What is the profit-maximizing price and sales level for riding mowers? 18. (5 points) If total costs at each output level were to double, would the profit maximizing output level be greater or smaller than that calculated in Question 17? Can you answe r this question without performing any calculations? Explain Directions: Please answer the questions in the space provided Points for ...
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