Case Assignment For this problem use the Herfindahl Index to compute market concentration: Suppose Apple has 45% of the U.S. market share for smartphones, followed by Samsung with 30%, LG with 9%, Motorola with 8%, HTC with 6%, and Nokia with 2%.  What is the Herfindahl Index for the smartphone industry based on these numbers? Based on the Herfindahl Index, do you think the government would be willing to approve a merger between Apple and Samsung? Now suppose Nokia and Motorola come out with a new smartphone that takes away a huge chunk of market share from Apple and Samsung. The new market shares are 25% for Apple, 20% for Samsung, 20% for Motorola, 20% for Nokia, 10% for LG, and 5% for HTC. Use what you learned about perfect competition, monopoly, and oligopoly to answer these questions: In the table below is the quantity produced, the price, the fixed costs, and variable costs for a perfectly competitive firm that faces a constant price of $150 for its product regardless of the quantity it sells.  Use the information in the first four columns to calculate the number for the last four columns.  At what quantity should they produce based on what you find with your results?  How do you think your answer might change if it became a monopolist with all of its competitors leaving the market?  Or if it became an oligopoly with only one or two competitors? Quantity Price Fixed Cost Variable Cost Total Cost Marginal Cost Total Revenue Profit/ Loss 0 150 200 - - 1 150 200 $140 2 150 200 $240 3 150 200 $320 4 150 200 $410 5 150 200 $520 6 150 200 $650 7 150 200 $810 8 150 200 $1,010 9 150 200 $1,310 10 150 200 $1,710 You’ve read about the prisoner’s dilemma in the background readings.  Suppose you are a business owner with just one main competitor.  If neither you nor your competitor cut your prices, you will both be more profitable.  However, if your competitor lowers its prices and you keep your prices high, then you will lose all of your sales to your competitor.  Every month you and your competitor place advertisements in the local newspaper with your price – so you need to decide each month whether or not to keep prices high, or lower them based on what you think your competitor might do. Go to the following webpage and test out some of your potential price strategies: http://www.gametheory.net/Mike/applets/PDilemma/Pdilemma.html The strategy “defect” indicates lowering your prices. The strategy “cooperate” means keep prices the same. Try out different strategies, such as cooperating all the time or defecting sometimes.  There are five different rounds of this game, each with a competitor with different personalities and different strategies.  Play all five rounds and experiment with different strategic approaches.  Report your scores for each round, and discuss which strategies seemed to work the best for you. Required Reading To start with, take a look at this short animated video that will introduce you to the basics of market structure:McGlasson, M. (2009). Episode 25: Market structures. https://www.youtube.com/watch?v=9Hxy-TuX9fs&list=PLr6g_xbkz_0u_cINHBVW1ZuEpozKk2XGxNow read Chapters 9 and 10 from the following book for more detail on these topics.  In particular, pay attention to the numerical examples and the “Self-Check Questions” at the end of each section.Taylor, T. (2014) Microeconomics. OpenStax College. http://cnx.org/contents/6i8iXmBj@10.174:WXgRcPaN@10/Introduction-to-a-Monopoly Finally, read this slightly more advanced chapter. Pay special attention to the sections at the end on game theory and the “Policy Response to Oligopoly” section that covers the Herfindahl index: Beveridge, T. M. (2013). Chapter 8: Between perfect competition and monopoly. A Primer on Microeconomics. [New York, N.Y.] [222 East 46th Street, New York, NY 10017]: Business Expert Press.

Overview People should understand the impact of different types of risk on financial health, whether they’re dealing with personal or corporate finances. The risks involved with personal finance often only impact individuals and families—for example, when determining if you can afford to buy a house or deciding whether to invest in stocks. Financial risks for businesses often affect multiple people throughout the entire company, including individuals who do not work in the finance department. When businesses make finance-related decisions, it is essential that they know how their decisions will impact different aspects of their company. Prompt Read the Assessing a Company’s Future Financial Health case study, then write a response. Specifically, you must address the following rubric criteria: Systematic and Unsystematic Risk: Explain the differences between systematic and unsystematic risk. Financial Risks: Describe the potential impacts of the following types of financial risk on the company featured in the case study: Interest rate risk Economic risk Credit risk Operational risk Lower Growth Impact: Explain the impact a lower growth in sales could have on the dividend policy and retained earnings for the company featured in the case study. Higher Growth Impact: Explain the impact a higher growth in sales could have on the dividend policy and retained earnings for the company featured in the case study.