Suppose the own price elasticity of market demand for retail gasoline is - 0.9 the Rothschild index is 0.6 and a typical gasoline retailer enjoys sales of $1.2 million annually. What is the price elasticity of demand for a representative gasoline retailer's producer?

16 Suppose Fiat recently entered into an Agreement and Plan of Merger with Case for $4.3 billion. Prior to the merger, the market for four-wheel-drive tractors consisted of five firms. The market was highly concentrated, with a Herfindahl-Hirschman index of 3,025. Case's share of market was 27 percent, while Fiat comprised just 13 percent of the market. If approved, by how much would the postmerger Herfindahl-Hirschman index increase? Based only on this information, do you think the Justice Department would challenge the merger? Explain.

18 Several years ago, Pfizer and Warner-Lambert agreed to a $90 billion merger, thus creating one of the world's largest pharmaceutical companies. Pharmaceutical companies tend to spend greater percentage of sales on R&D activities than other industries. The government encourages these R&D activities by granting companies patents for drugs approved by the Federal Drug Administration. For instance, Pfizer-Warner-Lambert spent large sums of money developing its popular cholesterol-lowering drug, Lipitor, which is currently protected under patent. Lipitor sells for about $3 per pill. Calculate the Learner index if the marginal cost of producing Lipitor is $0.30 per pill. Does the Lerner index make sense in this situation? Explain?