Waldman/Jensen – Industrial Organization Theory and Practice, Fourth Edition
Chapter 4
Page 7
Problem 2:
Problem 4:
The problem implies you would have actual numbers for the market shares, but only of
the largest six firms.
Let S1, S2, S3, S4, S5, and S6 be the shares of the largest six firms. Let ST be the total sum
of the shares of the largest six firms (S1 +S2 + S3 +S4 +S5 +S6).
1650. This is a more realistic upperbound, but a bit difficult to describe without actual
numbers.
In the numerical example, the lower bound would be: 302 + 202 + 102+ 102+ 52+ 52 =
1550.
Problem 6:
a. AC = TC/q = (800 + 8q + 8q2)/ q = 800/q + 8 + 8q
b. To find the output where MES sets in, we can look for the level of q where AC = MC.
800/q + 8 + 8q = 8 + 16q ; 8q = 800/q; q=10
Chapter 4
Page 8