Exam 7: The Nature of Industry

Suppose that there are two industries, A and B.There are five firms in industry A with sales at $5 million, $2 million, $1 million, $1 million, and $1 million, respectively.There are 4-firms in industry B with equal sales of $2.5 million for each firm.The four-firm concentration ratio for industry B is:

Which of the following kinds of market structure are not associated with market power?

"The law of comparative advantage suggests that managers should specialize in learning the tools needed to manage either a monopoly, oligopoly, monopolistically competitive, or perfectly competitive firm." Do you agree with this statement? Explain.

Borris Industries operates in an industry that has a Rothschild index of 0.75.The firm gained access to a government report that revealed the own-price elasticity of market demand within the industry to be -3.Use this information to obtain an estimate of the own-price elasticity of demand for the product produced by Borris Industries.

Consider a market characterized by a Herfindahl-Hirschman index of 5,000.One of the firms in this market has a Lerner index of 0.89 and is considering a horizontal merger with a competing firm.Based on this information is it likely that the U.S.Department of Justice will

Having worked for many of the firms in the petroleum industry, you know that the price elasticity of demand for a representative firm is about -1.25.Moreover, a recent report from an economist in your office revealed that the price elasticity of demand for the petroleum products sold by your firm is -1.5.Based on this information you know that Rothschild index is

An industry consists of six firms with annual sales of $300, $500, $400, $700, $600, and $600, respectively.What is the industry's HHI?

The widget industry is comprised of six firms of varying sizes.Firm 1 has 35 percent of the market.Firm 2 has 25 percent, and the remaining firms have 10 percent each.What is the Herfindahl-Hirschman index for the widget industry? Based on the U.S.Department of Justice merger guidelines described in the text, do you think the Justice Department would be likely to block a merger between firms 5 and 6?

According to the U.S.Department of Justice Merger Guidelines, a Herfindahl-Hirschman index (HHI) above _________ is associated with a highly concentrated industry.Therefore, if the automobile industry had an HHI of 2,200, then a vertical merger between GM and one of suppliers likely would be

Advertising is an aspect of a firm's:

A firm has a marginal cost of $18 and charges a price of $27.The Lerner index for this firm is:

Suppose the market for good X has a four-firm concentration ratio of 0.80.Having worked for the four largest firms in the industry, you know the sales for these four firms are given by $100,000, $125,000, $150,000 and $175,000.Based on this information we know that sales for the remaining firms in the industry are

Holding all else constant, higher prices will

Suppose that there are two industries, A and B.There are five firms in industry A with sales at $5 million, $2 million, $1 million, $1 million, and $1 million, respectively.There are 4-firms in industry B with equal sales of $2.5 million for each firm.The four-firm concentration ratio for industry A is:

A student figured out that the HHI for an industry was 13,000.What is the proper conclusion?

Omega Travel competes in the highly competitive market for travel.Consumers know that Omega has the best agents in the industry and offers superior service.Nonetheless, Omega earns zero economic profits because numerous competitors have entered the market over the last few years.Based on this information, does Omega operate in a perfectly competitive market? Why or why not?

The concentration and Herfindahl indices computed by the U.S.Bureau of Census must be interpreted with caution because

Star Computer and a small telecommunications company are considering a merger.A socially minded member of Star Computer's board of directors is against the merger, however, because she is concerned that the merger might not benefit society as a whole.Provide the board member with an argument for why it may be socially beneficial for the merger to take place.

Pricing is an aspect of a firm's:

Suppose each of the 50 states had only one gasoline station -- each of the same size.The four-firm concentration ratio for the state of New York, based on the state data, is: