1 Emporia State University

School of Business
Spring 2022
BC 807 OA
Homework 7 Total Points = 20

Homework 7 is due on Sunday, April 24th by 11:59 pm (Central Time). No extensions will be
granted. The class website on Canvas will stop accepting homeworks at 12:00 am on Monday,
April 25.

All homeworks must be uploaded to Canvas using the procedure described on the website (and
in the course syllabus). This is the ONLY way in which homeworks may be submitted.
Homeworks SHOULD NOT be sent by email, handed to the department secretary or
anyone else in the department office, left in my mailbox at the department office, slid under
my door or left outside my office (if you submit your homework through any of these methods,
I will not grade it and you will get a grade of zero for that homework).

The file containing your answers should be typed in Microsoft Word and the file name
MUST be “Homework7.YourName.docx” where YourName is your name (eg. JohnSmith)
(eg. Homework7.JohnSmith.docx).

You may use Google Docs to prepare your homework, but please upload the actual document
and DO NOT just send me a link to the document. You may also submit a PDF document with
your answers.

You should type all answers. Equations and graphs may be written/drawn by hand and then
scanned into your document. While you may discuss the homework with others, you should
write the answers by yourself. If two students submit identical (or largely similar answers) both
students will get zero points. Further penalties may apply.

All answers MUST be included in one file, even if you have to scan graphs or equations. It
is possible to include scanned images in Word documents, and they certainly can be included in
PDF documents. Please DO NOT submit multiple files with your answers.

Your answers must not be copied out of the textbook or from anywhere else, including the
internet. Copied assignments will be subject to sanctions, up to and including an administrative
withdrawal from the class.
1. (5 points) (a) If there are only three firms in an industry in a country, then what would the
four firm concentration ratio (C4) for this industry be equal to? Please show your calculations.

(b) There is only one firm in the United States (Boeing) that manufactures large passenger
aircraft (large passenger aircraft is definbed as aricraft that can transport more than 150
passengers). The C4 for this industry would therefore be 1 as C4 is based on only US data. Why
might Boeing face some competition in the market for large passenger aircraft even though the
C4 would imply that Boeing faces no competition at all? Please give an explanation.

2. (5 points) An industry is comprised of 20 firms, each with an equal market share (each firm’s

( )1
market share is 20 of the total market for the product produced in that industry).
(a) Please calculate the four-firm concentration ratio (C4) of this industry and show your
calculations.
(b) Please calculate the Herfindahl-Hirschman index (HHI) and show your calculations.

3. (5 points) The industry elasticity of demand for gadgets is −2, while the elasticity of demand
for an individual gadget manufacturer's product is −2.
(a) Please calculate the Rothschild index for this industry and show your calculations.
(b) Based on your answer in (a) would you say that there are many substitutes for gadgets in the
industry? Please explain.

4. (5 points) (a) If Ford (a manufacturer of cars) mergers with Goodyear (a manufacturer of

automobile tires) would that be considered a horizontal or vertical merger. Please explain.
(b) Will this merger between Ford and Goodyear lead to an increase in concentration in either the
car manufacturing industry or in the automobile tire manufacturing industry? Please explain.