Question 1

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 2

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

Accepted Answer

A)  Entry of new firms 
B)  Significant vertical integration 
C)  Exit of firms 
D)  A series of horizontal mergers 
A)  Entry of new firms 
B)  Significant vertical integration 
C)  Exit of firms 
D)  A series of horizontal mergers

Question 3

In Tuna,Texas,the retail gasoline market consists of six firms.Firm 1 has 35 percent of the market,Firm 2 has 25 percent,and the remaining firms have 10 percent each.What is the four-firm concentration ratio for this industry?

Accepted Answer

Four-firm

Question 4

As a general rule of thumb,industries with a Herfindahl index below ______ are considered to be competitive,while those above ______ are considered noncompetitive.

Accepted Answer

A)  1,000, 1,800 
B)  1,800, 1,000 
C)  1,000, 3,000 
D)  1,800, 3,000 
A)  1,000, 1,800 
B)  1,800, 1,000 
C)  1,000, 3,000 
D)  1,800, 3,000

Question 5

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:

Accepted Answer

A)  $687,500. 
B)  $550,000. 
C)  $250,500. 
D)  $137,500. 
A)  $687,500. 
B)  $550,000. 
C)  $250,500. 
D)  $137,500.

Question 6

Which of the following measures market power?

Accepted Answer

A)  Lerner index. 
B)  Herfindahl-Hirschman index. 
C)  Rothchild index. 
D)  Lerner index and Rothchild index. 
A)  Lerner index. 
B)  Herfindahl-Hirschman index. 
C)  Rothchild index. 
D)  Lerner index and Rothchild index.

Question 7

The Dansby-Willig index measures market:

Accepted Answer

A)  structure. 
B)  performance. 
C)  conduct. 
D)  behavior. 
A)  structure. 
B)  performance. 
C)  conduct. 
D)  behavior.

Question 8

Consider a market characterized by two firms that set the same price in the market,P = $10.Total market demand is QT = 100 − 2P,of which the two firms share equally.Based on this information,we can conclude:

Accepted Answer

A)  the HHI = 5,000 and the Rothschild index is 1. 
B)  the HHI = 2,500 and the Rothschild index is 2. 
C)  the HHI = 5,000 and the Rothschild index is 2. 
D)  None of the answers are correct. 
A)  the HHI = 5,000 and the Rothschild index is 1. 
B)  the HHI = 2,500 and the Rothschild index is 2. 
C)  the HHI = 5,000 and the Rothschild index is 2. 
D)  None of the answers are correct.

Question 9

There are five firms in an industry with sales at $7 million,$6 million,$3 million,$2 million,and $2 million,respectively.The four-firm concentration ratio is:

Accepted Answer

A)  0.8. 
B)  0.9. 
C)  1.0. 
D)  1.1. 
A)  0.8. 
B)  0.9. 
C)  1.0. 
D)  1.1.

Question 10

A frozen food company buys a fresh food company.This takeover 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 11

A Lerner index of 0 suggests:

Accepted Answer

A)  monopoly. 
B)  monopolistic competition. 
C)  oligopoly. 
D)  perfect competition. 
A)  monopoly. 
B)  monopolistic competition. 
C)  oligopoly. 
D)  perfect competition.

Question 12

In a perfectly competitive market that is operating at maximum efficiency,the Dansby-Willig index would be:

Accepted Answer

A)  zero. 
B)  0.25. 
C)  0.50. 
D)  1.00. 
A)  zero. 
B)  0.25. 
C)  0.50. 
D)  1.00.

Question 13

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

Accepted Answer

A)  1,659 
B)  1,779 
C)  1,839 
D)  1,909 
A)  1,659 
B)  1,779 
C)  1,839 
D)  1,909

Question 14

Which of the following is used to measure market structure and performance?

Accepted Answer

A)  Four-firm concentration ratio 
B)  HHI (Herfindahl-Hirschman index) 
C)  Dansby-Willig Performance index 
D)  All of the answers are correct. 
A)  Four-firm concentration ratio 
B)  HHI (Herfindahl-Hirschman index) 
C)  Dansby-Willig Performance index 
D)  All of the answers are correct.

Question 15

An industry consists of three firms with equal annual sales.What is the industry's C4?

Accepted Answer

A)  0.58 
B)  0.75 
C)  1.00 
D)  There is not sufficient information to compute the industry C4. 
A)  0.58 
B)  0.75 
C)  1.00 
D)  There is not sufficient information to compute the industry C4.

Question 16

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 17

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

Accepted Answer

A)  The market is monopolistically competitive. 
B)  The market is close to perfectly competitive. 
C)  The market is served by a monopoly. 
D)  The student made some computational errors. 
A)  The market is monopolistically competitive. 
B)  The market is close to perfectly competitive. 
C)  The market is served by a monopoly. 
D)  The student made some computational errors.

Question 18

There are five firms in an industry.You know sales of the four largest firms are $1,000,000,$500,000,$400,000,and $178,000.If the C4 ratio is 95 percent,then the HHI is:

Accepted Answer

A)  1,810. 
B)  2,755. 
C)  3,038. 
D)  5,017. 
A)  1,810. 
B)  2,755. 
C)  3,038. 
D)  5,017.

Question 19

Zelda Manufacturing has a rather unique product that sells for $15 per unit,and the marginal cost is $7.50.Determine the Lerner index for Zelda Manufacturing.Does this index indicate market power?

Accepted Answer

The Lerner index is (P − MC)/P

Question 20

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)  Both A and B are correct. 
D)  None of the statements 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)  Both A and B are correct. 
D)  None of the statements are correct.

Which market structure has the most market power?

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

In Tuna,Texas,the retail gasoline market consists of six firms.Firm 1 has 35 percent of the market,Firm 2 has 25 percent,and the remaining firms have 10 percent each.What is the four-firm concentration ratio for this industry?

As a general rule of thumb,industries with a Herfindahl index below are considered to be competitive,while those above are considered noncompetitive.

Which of the following measures market power?

The Dansby-Willig index measures market:

Consider a market characterized by two firms that set the same price in the market,P = $10.Total market demand is Q_T = 100 − 2P,of which the two firms share equally.Based on this information,we can conclude:

There are five firms in an industry with sales at $7 million,$6 million,$3 million,$2 million,and $2 million,respectively.The four-firm concentration ratio is:

A frozen food company buys a fresh food company.This takeover is an example of:

A Lerner index of 0 suggests:

In a perfectly competitive market that is operating at maximum efficiency,the Dansby-Willig index would be:

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

Which of the following is used to measure market structure and performance?

An industry consists of three firms with equal annual sales.What is the industry's C₄?

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

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

There are five firms in an industry.You know sales of the four largest firms are $1,000,000,$500,000,$400,000,and $178,000.If the C₄ ratio is 95 percent,then the HHI is:

Zelda Manufacturing has a rather unique product that sells for $15 per unit,and the marginal cost is $7.50.Determine the Lerner index for Zelda Manufacturing.Does this index indicate market power?

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

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

Exam 7: The Nature of Industry

Which market structure has the most market power?

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

In Tuna,Texas,the retail gasoline market consists of six firms.Firm 1 has 35 percent of the market,Firm 2 has 25 percent,and the remaining firms have 10 percent each.What is the four-firm concentration ratio for this industry?

As a general rule of thumb,industries with a Herfindahl index below ______ are considered to be competitive,while those above ______ are considered noncompetitive.

Which of the following measures market power?

The Dansby-Willig index measures market:

Consider a market characterized by two firms that set the same price in the market,P = $10.Total market demand is QT = 100 − 2P,of which the two firms share equally.Based on this information,we can conclude:

There are five firms in an industry with sales at $7 million,$6 million,$3 million,$2 million,and $2 million,respectively.The four-firm concentration ratio is:

A frozen food company buys a fresh food company.This takeover is an example of:

A Lerner index of 0 suggests:

In a perfectly competitive market that is operating at maximum efficiency,the Dansby-Willig index would be:

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

Which of the following is used to measure market structure and performance?

An industry consists of three firms with equal annual sales.What is the industry's C4?

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

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

There are five firms in an industry.You know sales of the four largest firms are $1,000,000,$500,000,$400,000,and $178,000.If the C4 ratio is 95 percent,then the HHI is:

Zelda Manufacturing has a rather unique product that sells for $15 per unit,and the marginal cost is $7.50.Determine the Lerner index for Zelda Manufacturing.Does this index indicate market power?

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

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

As a general rule of thumb,industries with a Herfindahl index below are considered to be competitive,while those above are considered noncompetitive.

Consider a market characterized by two firms that set the same price in the market,P = $10.Total market demand is Q_T = 100 − 2P,of which the two firms share equally.Based on this information,we can conclude:

An industry consists of three firms with equal annual sales.What is the industry's C₄?

There are five firms in an industry.You know sales of the four largest firms are $1,000,000,$500,000,$400,000,and $178,000.If the C₄ ratio is 95 percent,then the HHI is: