21 Nov Monopoly and Antitrust Policy

Order Instructions

Wrapup 5 Fall 2021

Note that there are 3 quesions.

 

1. First, go back to the Study Plan for “Monopoly” and review the section on Monopoly and Antitrust Policy.

 

Then based on the following case study, what would you recommend as the best policy: should this merger be allowed? (note, you can find the actual government decision here.) . However, you do not need to agree with this decision. I would like you to think through, based on what we have studied, should this merger have been permitted/ Concepts you may want to use include:

 

The HHI index

Economies of scale

Monopoly profits

Your decision will include reference to the data for ice cream market shares. Note that data are available for the premium ice cream market (product with a high fat content) and the more inclusive all store-bought ice cream market. Also, note that common brand names for ice cream—Breyers, Ben&Jerry’s and Haagen-Daz—are manufactured by corporates with other names.

 

Choose from the following:

 

A) The merger should be permitted with no additional recommendations.

B) The merger should not be permitted at all.

C) The merger should be permitted with minor limitations (specify the limitations).

D) The merger should be permitted with major limitation (specify the limitations).

 

 

Nestle proposed to merge its U.S. ice cream business with Dreyers’ ice cream.

 

Current market shares are:

 

Premium (high fat) ice cream market

Unilever (makes Breyers and Ben&Jerry’s) 41%

Nestles (makes Haagen-Dazs) 37%

Dreyers 19%

Others 3%

 

Total store-bought ice cream market

Unilever 21%

Dreyers 18%

Blue Bell 6%

Nestle 4%

Wells 3%

Armour 3%

Other brands 45%

 

2. In the follow situation for a monopoly firm in the short run, what is the profit maximizing level of output. Please show your work and be as precise as possible.

 

Q P FC MC______________________________________

 

0 $number of letters in your first name

 

$5

 

1 $21

 

$7

 

2 $19.

 

$10

 

3 $16

 

$15

 

4 $12

 

3. You are advising a friend who sells paintings on the sidewalk. What price should she put on all the paintings given the following information:

 

Price $100 Quantity demanded 1

 

Price $80 Quantity demanded 2

 

Price $60 Quantity demanded 3

 

Price $40 Quantity demanded 4

 

And the fixed cost for her business is $50, while it costs her $40 to paint each additional painting, how many paintings should she sell if she sells each painting for the same price and what will that price be? Please show your work.