Download Assume an industry is composed of the following eight firms

. Assume an industry is composed of the following eight firms.
Company
Market Share
Firm A
30 percent
Firm B
25 percent
Firm C
15 percent
Firm D
10 percent
Firm E
7 percent
Firm F
6 percent
Firm G
4 percent
Firm H
3 percent
a. If Firms B and C propose a merge, would the Antitrust Division likely challenge the merger? Why
or why not?
b. If firms G and H propose a merger, would the Antitrust Division likely challenge the merger?
Why or why not?
2. The widget Industry in Anytown is a monopoly, controlled by Widget Corp. Its demand curve for the
local market is given by
P = 800 – 20 W
Where W represents the number of widgets sold per period.
The total cost function (including opportunity or implicit costs) for Widget Corp. is
TC = 300 + 500 W + 10 W2
a. Assuming the industry is unregulated, what are the equilibrium price and output and economic
profits earned by Widget Corp.?
b. If the industry is regulated and the regulatory authority forces Widget Corp. to earn only a
normal return on investment (which is included in its cost function), what is the resulting
equilibrium price and quantity?
c. What happens to consumer surplus? What happens t o the economic profits earned by Widget
Corp.?
3. Discuss the various ways governments can handle externalities, such as noise from a local airport or a
barking dog or building of commercial office space or an industrial building in a residential area? How
does the assignment of property rights affect the outcome? Under what circumstances would a socially
optimal solution arise without any government intervention? Under what circumstances would
government intervention likely move the outcome closer to a socially optimal solution?