Question

Please explain thoroughly.

Suppose there are three firms, one of which has 80% market share, andthe other two which each have 10% market share. What will be the change in the Herfindahl-Hirschman Index if the largest firm purchased both of the two smaller firms so that there is one firm remaining?

(a) A decrease of 1700
(b) A decrease of 3400
(c) An increase of 1700
(d) An increase of 3400

A merger between Boeing, a producer of aircraft, and American Airlines
would be an example of
(a) A horizontal merger
(b) A vertical merger
(c) A conglomerate merger
(d) All of the above

In the posted reading about airline competition, the new rival airline enter-
ing the U.S. market is from which country?

(a) Canada
(b) France
(c) Germany
(d) Norway

In the posted reading about the Canadian maple syrup cartel, the cartel is
enforced by
(a) requiring all maple syrup producers to sell their syrup through a single wholesaler
(b) Mr. Hodge
(c) a trigger strategy (i.e. grim punishment strategy)
(d) the members all having an incentive not to produce any more syrup than desired by the
cartel

Answer 1

1. Ans: An increase of 3400

Explanation:

HHI before purchase = 80² + 10² + 10² = 6400 + 100 + 100 = 6600

HHI after purchase = 100² = 10,000

Change in HHI = 10,000 - 6,600 = 3,400 (increase)

2. Ans: A vertical merger

Explanation:

Because boing is a producer of aircrafts and American Airlines is an airline service provider. American Airlines can buy aircrafts from boing. So, it is called vertical merger.

Question 3 & 4 can not be answered without posted reading which is missing.