Assignment #7 by 8g7js2


									Assignment #7
1.    Complete the matching sheet.
2.    A few years ago, the US Justice Department filed suit to block software giant
      Microsoft’s planned acquisition of financial software maker Intuit. Estimated
      reports placed Microsoft’s share of the personal finance software market at about
      20%, compared with Intuit’s 70 percent share. After spending over $4 million on
      merger plans, Microsoft announced one month later that it had decided to call off
      the deal. In addition to the lost $4 million, Microsoft paid Intuit over $40 million
      for backing out of the deal. Do you think Microsoft should have spent $4 million
      on merger plans in the first place?
3.    A firm has $1 million in sales, a Lerner index of 0.65, and a marginal cost of $35,
      and competes against 1000 other firms in its relevant market
      a.       What price does this firm charge its customers?
      b.       by what factor does this firm mark up its price over marginal cost?
      c.       do you think the firm enjoys much market power? Explain
4.    In the 1990s, five firms supply amateur color film in the United States, Kodak,
      Fuji, Konica, Agfa and 3M. From a technical viewpoint, there was little
      difference in the quality of color film produced by these firms, yet Kodak market
      share was 67%. The own price elasticity of demand for Kodak film was -2.0 and
      the market elasticity of demand was -1.75. Suppose that in the 1990s, the average
      retail price of a roll of Kodak film was $6.95 and that Kodak’s marginal cost was
      $3.475 per roll. Based on this information, discuss the industry concentration,
      demand and market conditions and the pricing behavior of Kodak in the 1990s.
      Do you think the industry environment is significantly different today? Explain

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