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A cigarette industry consists of 4 firms, each producing a differentiated product. As common in the...

A cigarette industry consists of 4 firms, each producing a differentiated product. As common in the tobacco industries, the prices of the differentiated products are the same atP= 2. The demandsQ1,Q2,Q3,Q4for firms 1,2,3,4 are given byQ1= 7−P2,Q2= 6−2P,Q3= 2−P/2, andQ4= 12−P3.

(a) What is the market share of each of the four firms?

(b) What is the 3-largest-firm concentration?

(c) What is the HHI?

(d) Come up with an example of market shares in an industry with four firms, such that the 2-largest-firm concentration is no more than 50 (for example, if market shares are10, 10, 30, 50, then the 2-largest-firm concentration is 80, which is more than 50. So this example is not an answer to the question). Come up with another example of market shares in an industry with ten firms, such that the HHI is no more than 1100.

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