Assignment 3 is due at 2pm (before start of class) on Tuesday 3/2. Please see grading policy on course homepage for additional details regarding early/late submissions.

Please submit your answers in plain text (no attachments) to i250hw@ischool.berkeley.edu.

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1. (2 points) Suppose a malfunctioning hardware in a character-oriented transmission system sets all bits transferred to zero. Will a parity bit catch the problem? Why or why not?

2. (3 points) Why can't the CSMA/CD scheme be used over arbitrarily long distances (e.g., for WANs)?

3. (3 points) In the 10 Gigabit Ethernet specification, all computers must be connected via switches as opposed to hubs or repeaters. Explain why this requirement renders CSMA/CD unnecessary.

4. (5 points) In a market characterized by a cost function c(q) = c (i.e., zero marginal cost) and a linear demand function p(q) = 1 - q, we find (during our lecture discussion) that if a monopoly producer can segment the market according to consumer willingness-to-pay into two equal halves, then the monopolist will charge the high-value segment with a price p1=0.5, and the low-value segment with a price p2=0.25, realizing a producer surplus of 0.3125. (This is summarized in the table on Slide 6 of the lecture.)

(a) If instead the producer is only able to segment the market as 20% high-value and 80% low value, then how should the producer set prices for each market segment to maximize its profits?

(b) What is the producer surplus?

(c) What is the resultant consumer surplus?

(d) What is the resultant dead weight loss?

(e) What fraction of the market is excluded from consuming the service?

(bonus challenge) (1 point) If the producer can split the market into two segments at any arbitrary boundary of q, then what is the split that will maximize the producer's profits?


5. (6 points) Many of the largest mergers and acquisitions in history have involved firms in the telecommunications industry. For each of the following transactions, identify the primary business of the two firms, and whether the transaction should be considered a vertical integration or a horizontal merger.

(a) Bell Atlantic/GTE to become Verizon -- $53 billion (2000)
(b) Qwest/US West to become Qwest -- $35 billion (2000)
(c) AOL/Timer Warner to become AOL Time Warner -- $164 billion (2001)
(d) Sprint/Nextel to become Sprint Nextel -- $35 billion (2005)
(e) SBC/AT&T Corp. to become AT&T Inc. -- $16 billion (2005)
(f) AT&T Inc./BellSouth to become AT&T Inc. -- $86 billion (2007)