Question: 1 a homogeneous good industry is composed of 3 firms...
1. A homogeneous good industry is composed of 3 firms. You are given the following information on output, price and marginal cost of each firm: q1 =20 q2 =40 q3 =120 p = 20.50 c1 =20 c2 =19.5 c3 =17.5 Remember that for each firm (p−ci/p) =((alpha)*i/n)) where (alpha)i is the market share of firm i and n is the price elasticity of demand.
a) Calculate the 2-firm concentration ratio.
b) Calculate the Herfindahl index.
c) Calculate the number equivalent. What does it mean?
d) Calculate the Lerner index of the largest firm.
e) Calculate the price elasticity demand of the largest firm.