Question 1

Which of the following may transform an industry from oligopoly to monopolistic competition?

Accepted Answer

A) Entry. 
B) Takeover. 
C) Exit. 
D) Acquisition. 
A) Entry. 
B) Takeover. 
C) Exit. 
D) Acquisition.

Question 2

The industry elasticity of demand for good X is -1.5, while the elasticity of demand for an individual manufacturer of good X product is -9.Based on this information, the Rothschild index of market power is:

Accepted Answer

A) 1/6, indicating there is little monopoly power in this industry. 
B) 6, indicating there is significant monopoly power in this industry. 
C) 6, indicating there is little monopoly power in this industry. 
D) none of the statements associated with this question are correct. 
A) 1/6, indicating there is little monopoly power in this industry. 
B) 6, indicating there is significant monopoly power in this industry. 
C) 6, indicating there is little monopoly power in this industry. 
D) none of the statements associated with this question are correct.

Question 3

When the relevant markets are local, the concentration and HHI based on figures for the entire United States tend to:

Accepted Answer

A) be biased downward. 
B) be biased upward. 
C) give a more precise description of the real situation. 
D) ignore the presence of import goods. 
A) be biased downward. 
B) be biased upward. 
C) give a more precise description of the real situation. 
D) ignore the presence of import goods.

Question 4

When economies of scale are large, firms can reduce their average total cost by

Accepted Answer

A) selling off their subsidiaries. 
B) merging into an even larger firm. 
C) eliminating the bureaucratic costs. 
D) hiring professional managers. 
A) selling off their subsidiaries. 
B) merging into an even larger firm. 
C) eliminating the bureaucratic costs. 
D) hiring professional managers.

Question 5

Which market structure has the most market power?

Accepted Answer

A) Monopolistic competition. 
B) Perfect competition. 
C) Monopoly. 
D) Oligopoly. 
A) Monopolistic competition. 
B) Perfect competition. 
C) Monopoly. 
D) Oligopoly.

Question 6

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

Accepted Answer

A) they overstate the actual level of concentration in markets served by foreign firms. 
B) they understate the degree of concentration in local markets, such the gasoline market. 
C) all of the statements associated with this question are correct. 
D) none of the statements associated with this question are correct. 
A) they overstate the actual level of concentration in markets served by foreign firms. 
B) they understate the degree of concentration in local markets, such the gasoline market. 
C) all of the statements associated with this question are correct. 
D) none of the statements associated with this question are correct.

Question 7

A firm has a marginal cost of $20 and charges a price of $40.The Lerner index for this firm is:

Accepted Answer

A) 0.20. 
B) 0.50. 
C) 0.33. 
D) 0.75. 
A) 0.20. 
B) 0.50. 
C) 0.33. 
D) 0.75.

Question 8

An electronic company takes over one of its original suppliers in a merger.This is an example of:

Accepted Answer

A) vertical integration. 
B) horizontal integration. 
C) cointegration. 
D) conglomerate integration. 
A) vertical integration. 
B) horizontal integration. 
C) cointegration. 
D) conglomerate integration.

Question 9

A local telephone company charges $.10/min.based on a $.08/min.marginal cost of operation.What is the Lerner Index?

Accepted Answer

A) 0.2. 
B) 0.25. 
C) 0.40. 
D) 0.50. 
A) 0.2. 
B) 0.25. 
C) 0.40. 
D) 0.50.

Question 10

According to the "feedback critique"

Accepted Answer

A) the conduct of firms may affect firm performance. 
B) the conduct of firms may affect market structure. 
C) market structure may affect the firm's conduct. 
D) all of the statements associated with this question are correct. 
A) the conduct of firms may affect firm performance. 
B) the conduct of firms may affect market structure. 
C) market structure may affect the firm's conduct. 
D) all of the statements associated with this question are correct.

Question 11

The HHI of a local market is usually _____________ that of national markets.

Accepted Answer

A) lower than. 
B) the same as. 
C) higher than. 
D) twice. 
A) lower than. 
B) the same as. 
C) higher than. 
D) twice.

Question 12

Monopolistic competition is characterized by:

Accepted Answer

A) heterogenous products. 
B) employing labor from a perfectly competitive labor market. 
C) no free entry. 
D) large markets. 
A) heterogenous products. 
B) employing labor from a perfectly competitive labor market. 
C) no free entry. 
D) large markets.

Question 13

An electronic company purchases a food company.This is an example of:

Accepted Answer

A) vertical integration. 
B) horizontal integration. 
C) cointegration. 
D) conglomerate integration. 
A) vertical integration. 
B) horizontal integration. 
C) cointegration. 
D) conglomerate integration.

Question 14

The ranking of industries by the four-firm concentration ratio usually, but not always, reveals the same pattern as ranking by HHI.When a discrepancy is found it is usually due to the following:

Accepted Answer

A) The four-firm concentration indices contain data on only the largest four-firms, while the HHI are based on data for all firms in the industry. 
B) The HHI is based on squared market shares, while the four-firm concentration ratio is not. 
C) The four-firm concentration indices contain data on only the largest four-firms, while the HHI are based on data for all firms in the industry and the HHI is based on squared market shares, while the four-firm concentration ratio is not. 
D) The two indices are designed to measure two different attributes of markets. 
A) The four-firm concentration indices contain data on only the largest four-firms, while the HHI are based on data for all firms in the industry. 
B) The HHI is based on squared market shares, while the four-firm concentration ratio is not. 
C) The four-firm concentration indices contain data on only the largest four-firms, while the HHI are based on data for all firms in the industry and the HHI is based on squared market shares, while the four-firm concentration ratio is not. 
D) The two indices are designed to measure two different attributes of markets.

Question 15

During a sales meeting one of the regional managers of Toga Industries remarked that structural variables such as advertising and R&D activities by rival firms were likely to hamper the firm's sales over the next year.The manager received numerous stares after making the remarks.Why?

Accepted Answer

Structural variables include firm size,

Question 16

In perfect competition, which is not true?

Accepted Answer

A) Both concentration ratios and Rothschild indexes tend to be close to zero. 
B) There are a large number of firms, and each is small relative to the entire market. 
C) At least one firm has a perceptible impact on the market price. 
D) Firms produce homogenous goods. 
A) Both concentration ratios and Rothschild indexes tend to be close to zero. 
B) There are a large number of firms, and each is small relative to the entire market. 
C) At least one firm has a perceptible impact on the market price. 
D) Firms produce homogenous goods.

Question 17

In the 1960s, each firm in the computer industry was able to make extremely large profit margins, some as high as 50-60%.The margin decreased to 20-40% in the 1970s and to 10-20% in the 1980s.We conclude that:

Accepted Answer

A) Market power increased in the two decades. 
B) The industry has evolved from oligopolistic to a more competitive industry in the two decades. 
C) Lower profit margins were due to the government's regulation to protect consumers. 
D) Lower profit margins were largely due to the mal-management of computer firms. 
A) Market power increased in the two decades. 
B) The industry has evolved from oligopolistic to a more competitive industry in the two decades. 
C) Lower profit margins were due to the government's regulation to protect consumers. 
D) Lower profit margins were largely due to the mal-management of computer firms.

Which of the following may transform an industry from oligopoly to monopolistic competition?

The industry elasticity of demand for good X is -1.5, while the elasticity of demand for an individual manufacturer of good X product is -9.Based on this information, the Rothschild index of market power is:

When the relevant markets are local, the concentration and HHI based on figures for the entire United States tend to:

When economies of scale are large, firms can reduce their average total cost by

Which market structure has the most market power?

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

A firm has a marginal cost of $20 and charges a price of $40.The Lerner index for this firm is:

An electronic company takes over one of its original suppliers in a merger.This is an example of:

A local telephone company charges $.10/min.based on a $.08/min.marginal cost of operation.What is the Lerner Index?

According to the "feedback critique"

The HHI of a local market is usually _____________ that of national markets.

Monopolistic competition is characterized by:

An electronic company purchases a food company.This is an example of:

The ranking of industries by the four-firm concentration ratio usually, but not always, reveals the same pattern as ranking by HHI.When a discrepancy is found it is usually due to the following:

During a sales meeting one of the regional managers of Toga Industries remarked that structural variables such as advertising and R&D activities by rival firms were likely to hamper the firm's sales over the next year.The manager received numerous stares after making the remarks.Why?

In perfect competition, which is not true?

In the 1960s, each firm in the computer industry was able to make extremely large profit margins, some as high as 50-60%.The margin decreased to 20-40% in the 1970s and to 10-20% in the 1980s.We conclude that:

The Fundamentals of Managerial Economics

Market Forces: Demand and Supply

Quantitative Demand Analysis

The Theory of Individual Behavior

The Production Process and Costs

The Organization of the Firm

Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

Basic Oligopoly Models

Game Theory: Inside Oligopoly

Pricing Strategies for Firms With Market Power

The Economics of Information

Advanced Topics in Business Strategy

A Managers Guide to Government in the Marketplace

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Exam 7: The Nature of Industry

Which of the following may transform an industry from oligopoly to monopolistic competition?

The industry elasticity of demand for good X is -1.5, while the elasticity of demand for an individual manufacturer of good X product is -9.Based on this information, the Rothschild index of market power is:

When the relevant markets are local, the concentration and HHI based on figures for the entire United States tend to:

When economies of scale are large, firms can reduce their average total cost by

Which market structure has the most market power?

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

A firm has a marginal cost of $20 and charges a price of $40.The Lerner index for this firm is:

An electronic company takes over one of its original suppliers in a merger.This is an example of:

A local telephone company charges $.10/min.based on a $.08/min.marginal cost of operation.What is the Lerner Index?

According to the "feedback critique"

The HHI of a local market is usually _____________ that of national markets.

Monopolistic competition is characterized by:

An electronic company purchases a food company.This is an example of:

The ranking of industries by the four-firm concentration ratio usually, but not always, reveals the same pattern as ranking by HHI.When a discrepancy is found it is usually due to the following:

During a sales meeting one of the regional managers of Toga Industries remarked that structural variables such as advertising and R&D activities by rival firms were likely to hamper the firm's sales over the next year.The manager received numerous stares after making the remarks.Why?

In perfect competition, which is not true?

In the 1960s, each firm in the computer industry was able to make extremely large profit margins, some as high as 50-60%.The margin decreased to 20-40% in the 1970s and to 10-20% in the 1980s.We conclude that:

The Fundamentals of Managerial Economics

Market Forces: Demand and Supply

Quantitative Demand Analysis

The Theory of Individual Behavior

The Production Process and Costs

The Organization of the Firm

Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

Basic Oligopoly Models

Game Theory: Inside Oligopoly

Pricing Strategies for Firms With Market Power

The Economics of Information

Advanced Topics in Business Strategy

A Managers Guide to Government in the Marketplace

Filters