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Question
a.What measure is used by banking authorities who wish to calculate the degree of monopoly power in a banking market (give the name or the acronym)? Write the equation that is used and describe what each term means.b.Suppose the banking market in Charlottesville consists of five banks that each having a market share of 15 percent and five more banks each having a market share of 5 percent.
Calculate the measure of monopolypower.
c.Three of the banks that currently have 15 percent of the market would like to merge and form First Super Bank of Charlottesville. If the merger were allowed, calculate the new measure of monopolypower.
d.Under the standard set of guidelines of the U.S. Department of Justice, would the merger be allowed? Explain why or why not, describing the guidelines and your results from parts (b) and(c).
Answer
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