MBA 604/607 Take Home Exam Fall 2015 This is a take home exam. You may use ONLY your notes, book, assigned readings and your brain. You may not...

2. An incumbent firm is considering expanding its capacity. It can do so in one of two ways. It can purchase fungible, general purpose equipment and machinery that can be resold at close to its original value. Or it can invest in highly specialized machinery that, once it is put in place, has virtually no salvage value. Assuming that each choice results in the same production costs once installed, under which choice is the incumbent likely to encounter a greater likelihood of entry and why?  (2 paragraphs max) (10 points)

3.In seeking an injunction to stop Coca Cola's proposed acquisition of Dr. Pepper, the Federal Trade Commission (FTC) argued that the appropriate line of commerce was "carbonated soft drinks" and referred to the impact of the acquisition on market structure in "geographical submarkets".  Discuss the ambiguities that arise in market definition and show how these would lend support to the FTC's case. (1-3 paragraphs) (10 points))

4.

Indicate whether the strategic effect of the following competitive move is likely to be positive (beneficial to the firm making them) or negative (harmful to the firm making them). 

Two producers of printing presses – one located in the United States and the other located in Europe – compete in the European market as Cournot quantity competitors. The U.S. manufacturer lobbies the U.S. government to give it an export subsidy, the amount of which is directly proportional to the amount of output the firm sells in the European market.  (2 paragraphs max)  (10 points)

Attached Q7