Question

(10 Marks) (Some parts of this question could be solved using the approximation shortcut discussed last conference to save time) (No decimals in answers - answers to decimal places) The golf ball manufacturing market is composed of 36 firms with market shares as specified in the table below: Market Firm Market Firm Share Market Firm Share Market Firm Share Share 1 12% 10 5% 19 0.6% 28 0.55% 2 12% 11 2% 20 0.6% 29 0.55% 3 9% 12 2% 21 0.6% 30 0.55% 4 9% 13 1% 22 0.6% 31 0.55% 23 0.6% 32 0.55% 5 8% 14 1% 8% 15 1% 24 0.6% 33 0.55% 7 7% 16 0.9% 25 0.6% 34 0.53% 8 6% 17 0.8% 26 0.6% 35 0.53% 9 ол % 18 0.7% 27 0.6% 36 0.52% What is the 4-Firm Concentration Ratio? (3.3 marks) % What is the approximate Herfindahl Index? (3.3 marks; ranges within 200 points of the exact answer would be considered correct) What type of market is this most likely to be? (3.3 Marks) (Possible Choices: Monopoly, Oligopoly, Perfect Competition, Monopolistic Competition)

Answer 1

1-	4 Firm Concentration ratio	Sum of market share of 4 largest firms market share	(12%+12%+9%+9%)	42.00%
2-
	Firm	Market share in %	Square of market share
	1	12	144
	2	12	144
	3	9	81
	4	9	81
	5	8	64
	6	8	64
	7	7	49
	8	6	36
	9	5	25
	10	5	25
	11	2	4
	12	2	4
	13	1	1
	14	1	1
	15	1	1
	16	0.9	0.81
	17	0.8	0.64
	18	0.7	0.49
	19	0.6	0.36
	20	0.6	0.36
	21	0.6	0.36
	22	0.6	0.36
	23	0.6	0.36
	24	0.6	0.36
	25	0.6	0.36
	26	0.6	0.36
	27	0.6	0.36
	28	0.55	0.3025
	29	0.55	0.3025
	30	0.55	0.3025
	31	0.55	0.3025
	32	0.55	0.3025
	33	0.55	0.3025
	34	0.53	0.2809
	35	0.53	0.2809
	36	0.52	0.2704
	Average Herfindahl Index = sum of square of market share		731.83
3-	This market is likely to be perfect competition as the concentration ratio of 4 firm is less than 50% of total market.