Question: Problem 2 0 - 1 2 Calculation of Change in the HHI Associated with a Merger ( LG 2 0 - 2 ) Cakes Corporation

Problem 20-12 Calculation of Change in the HHI Associated with a Merger (LG20-2)
Cakes Corporation currently has a 80 percent market share in baking services, followed by Cookies, Incorporated with 10 percent and
Dippen Dough with 10 percent.
a. What is the concentration ratio as measured by the Herfindahl-Hirschman Index (HHI)?
b. If Cakes Corporation acquires Cookies, Incorporated what will be the new HHI?
c. Assume the Justice Department will allow mergers as long as the changes in HHI do not exceed 1,200. What is the minimum
amount of assets that Cakes Corporation will have to divest after it merges with Cookies, Incorporated?
Note: Round your answer to 4 decimal places.
Problem 20-12 Calculation of Change in the HHI Associated with a

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