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 the Yum! corporation be allowed to own three fast food chains? 

Use the following concepts:

The HHI index

Economies of scale 

• Monopoly profits
• Choose from the following:
• A) The merged ownership should have been permitted with no additional recommendations.
  B) The merged ownership should not be permitted at all.
  C) The merged ownership should be permitted with minor limitations (specify the limitations).
  D) The merged ownership should be permitted with major limitation (specify the limitations).

The Yum! corporation owns the merged firms: KFC, Pizza Hut and Taco Bell

Market shares in the US are:

McDonalds 30% ($40,000,000,000 US revenue)

Starbucks 15%

Chick-Fil-A 7%

Taco Bell 7%

Burger King 7%

Subway 6%

Wendys 5%

Dunkin 5%

Dominos 4%

Pizza Hut 4%

KFC 3%

Sonic 3%

Arbys 2%

Dairy Queen 2%

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                      FC is number of letters in your last name

                                   $6

1          $30

                                   $8

2          $27              

                                   $10

3          $24

                                   $12

4          $21

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 $50 Quantity demanded 1

Price $40 Quantity demanded 2

Price $30 Quantity demanded 3

Price $20 Quantity demanded 4

And the fixed cost for her business is $30, while it costs her $20 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.

4. Go back to the example you used in the discussion of an example of price discrimination that you have experienced. Imagine that you are explaining to a friend who has not studied economics. Don’t use the term “elasticity,” but explain in words how this concept explains how the producer benefits from price discrimination.