Concentration index is affected by, e.g.

merger
Firm Rank

Market Share
(%)

1
Assume
that firms
24 and 5 decide
to merge
3
4
5
6
7

25 25

625
Market shares
25 25
625
change
25 25
625
5

5
5

The Concentration
Index changes

8
Concentration Index

Squared Market
Share

25

10

25

25

25

25

CR4 = 80

85

H = 1,900

Typo

100

1,925

12

 Demand and MR

typo
P
a

In the case of linear demand curves,

the MR curve has the same price
intercept as the demand curve (or AR
curve) and twice the slope.

Q
D = a bQ
MR = a 2bQ

16

MC1

MC2

MCT

Remarks:

P*
MR*

D = AR
MR
Q
Q1

Q2

QT

Algorithm: You choose total quantity

QT first by equalizing MR and MCT and
distribute QT over the two plants so that
MC1 = MC2 = MR. (Note that MCT is
obtained by horizontally adding up MC1
and MC2.)
typo

When MCs are non-constant but

increasing, the monopolist will produce
more from the lower-cost plant than
from the higher-cost firm. If MCs of
the two firms are not increasing in the
same speed, the distribution of the
production across the two plants would
depend on how big the total sales is,
which again would depend on how
strong the market demand is.
If the demand is not too strong, then
the monopolist may decide to produce
the total sales from one plant only and
idle the other plant.
(Can you depict the cases graphically?)
30