Consider the Following market for Widgets for question #1 and #2: Company Market

Question

Consider the Following market for Widgets for question #1 and #2: Company Market Share Widget Brothers ABC Widgets Discount Widgets Widget Warehouse Widgets Widgets Widgets 20% 2096 15% 5% 5% 1. What is the Four Firm Concentration Ratio of this industry? 2. What is the HHI of this industry? 3. Compare and contrast perfect competition and monopolistic competition. In what ways are they similar? In what ways are they different? 4. Compare and contrast Average Total Cost and Average Variable Cost. How do they relate to Marginal Cost?

Explanation / Answer

(1)

Four-firm concentration Ratio = 35% + 20% + 20% + 15% = 90% (= 0.90)

(2)

HHI = (35)2 + (20)2 + (20)2 + (15)2 + (5)2 + (5)2 = 1,225 + 400 + 400 + 225 + 25 + 25

= 2,300

NOTE: As per Chegg answering guidelines, first 2 questions (using same information) are answered.

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