Calculate the measure of monopoly power

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a. Suppose the banking market in Richmond area consists of five banks that each has 15 percent of the market and five more banks that each has 5 percent of the market. Calculate the measure of monopoly power.

b. Three of the banks that currently have 15 percent of the market would like to merge and form First Super Bank of Richmond. If the merger were allowed, calculate the new measure of monopoly power.

c. Should the merger be allowed? Explain why or why not. Use your results from parts (a) and (b) above.

Reference no: EM13735440

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