Strategy

NAME_______________________________________________________________

FE461 Professor Schmitt

First Problem Set

Due 31 January 2012

1. (20 points) Suppose Tyco International has complete control over the plastic hangar market. Suppose the inverse demand for hangars is given by: [pic]. Suppose that the total costs is given by: [pic]

a) What is the equilibrium price and quantity of hangars in the market if the market is competitive?

b) What is the equilibrium price and quantity of hangars if the market is monopolized?

c) What is the deadweight or welfare loss of the monopoly in this market?

2. (20 points) Use the following tables to answer questions about market concentration and market power:

|Firm |Market Share |Firm |Market Share |

|Daimler Chrysler |0.087 |Disney |0.147 |

|Mazda |0.019 |Dreamworks |0.103 |

|Mitsubishi |0.026 |Fox |0.097 |

|Subaru |0.013 |MGM/UA |0.013 |

|BMW |0.018 |Miramax |0.063 |

|Hundai |0.026 |New Line |0.052 |

|Mercedes |0.017 |Paramount |0.105 |

|Volkswagen |0.049 |Sony |0.088 |

|Suzuki |0.002 |Universal |0.145...