ECON2410 QUESTION 5 A market has 5 firms. One firm has a market share of 50%, a second 35%, and the other three 5% each. What is the Herfindahl index for this market? Based on your result, determine...

Referencing is not needed as it has to be original work


ECON2410 QUESTION 5 A market has 5 firms. One firm has a market share of 50%, a second 35%, and the other three 5% each. What is the Herfindahl index for this market? Based on your result, determine the intensity of price competition. QUESTION 9 Explain how incumbents can erect strategic barriers (i.e. what should an incumbent firm do to deter entry or hasten exit by competitors). QUESTION 12 Suppose two firms (Firm 1 and Firm 2) are producing a product. The total demand is: Q = 100 – P, where Q = Q1 + Q2. Each of the two firms has the cost function TC = 20Q. Based on the information given, calculate the equilibrium P, Q, Q1, Q2, Profit1 and Profit2 under monopoly (collusion), Cournot, and Stackelberg. For the Stackelberg model, assume that Firm 1 is the leader and Firm 2 is the follower. Show all your workings to gain full marks. QUESTION 14 The Cournot and Bertrand models make dramatically different predictions about the quantities, prices and profits that will arise under oligopolistic competition. Explain the two ways of reconciling the two models. QUESTION 15 Suppose the demand curve for product x is given by Qx = 700 - 0.3(Px)² - 0.02(Py)³. What is the cross-price elasticity of demand x with respect to y when Px = $30 and Py = $20? Interpret your answer. QUESTION 16 The use of the SSNIP (Small but Significant Nontransitory Increase in Price) test presents some difficulties when it is to be used in non-merger investigations. One of the difficulties is referred to as the “cellophane fallacy”. Explain the main argument under the cellophane fallacy. QUESTION 18 Building a competitive advantage based on a superior cost position is likely to be attractive when three conditions are met. Explain the three conditions. QUESTION 21 Suppose a firm has $300 million to invest in a new market. Given market uncertainty, the firm forecasts a high-scenario where the present value of the investment is $600 million, and a low- scenario where the present value of the investment is $200 million. Assume the firm believes each scenario is equally likely. Suppose that by waiting, the firm can learn with certainty which scenario will arise. If the firm waits one year and learns that high scenario will happen, its expected net present value of investment is $141.5 million. Using the above information, calculate: (a) the annual discount rate; and (b) the difference in the expected net present value of investment between waiting a year and then invest and investing today. QUESTION 5 QUESTION 9 QUESTION 12 QUESTION 14 QUESTION 15 QUESTION 16 QUESTION 18 QUESTION 21