1. Assume the banking market in Richmond area consists of 5 banks that each has 15 percent of the market and five more banks that each has 5 percent of the market. Determine the measure of monopoly power.
2. Three of the banks that currently have 15% of the market would like to merge and produce the First Super Bank of Richmond. If the merger were allowed, determine the new measure of monopoly power.
3. Should the merger be allowed? Discuss why or why not.