Question

Question 32 6 pts Using the definition for utility maximization, if shoes cost $100 and give you 50 utils, a $250 concert ticket should give you utils.

Answer 1

Question No:31

1.) HHI means Herfindahl-Hirschman Index. HHI of an industry is determined by analysing the market share of each and every firm in a given industry. It is computed by squaring the market share and adding the whole.

HHI = 50² + 25² + 20² + 10² + 5²

= 2500 + 625 + 400 + 100 + 25

= 3650

2.) If HHI is lesser than 1500, then the industry is said to be competitive marketplace. If HHI comes between 1500 and 2500, then it is said to be a moderately concentrated marketplace. If HHI is above 2500, it is said to be highly concentrated marketplace.

Here, in this question, HHI is 3650 which is greater than 2500. Therefore, this industry is said to be highly concentrated.

3.) If a merger is happened in this industry, HHI of the whole country will be increased because the market share of both the merging companies will be definitely spread over various geographical parts of the country. Therefore, the index value will be very much greater in many markets.

Hence, merger is approved in such an industry.

Question No:32

Marginal Utility =  MUx/Px = MUy/Py

where, MUx represents the marginal utility from goods 'x' ,

  Px represents the cost of goods 'x',

  MUy represents the marginal utility from goods 'y' ,

  Py represents the cost of goods 'y'.

Hence, in this question, MUshoes/Pshoes = MUconcert ticket/Pconcert ticket

Therefore, 50/100 = MUconcert ticket/250

250 = 2MUconcert ticket

MUconcert ticket = 250/2

= 125

Hence, cost of concert ticket = 125