Exam 7: The Nature of Industry

The Beta Corporation operates in an industry that has a Herfindahl-Hirschman index of 2,800.Beta wants to merge with Alpha Enterprises,but Alpha has argued that the merger will be blocked by the Justice Department.Are there conditions under which the Justice Department would allow the merger?

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,it is likely that the U.S.Department of Justice will:

Suppose the market for good X has a four-firm concentration ratio of 0.70.Having worked for the four largest firms in the industry,you know the sales for these four firms are given by $200,000,$225,000,$250,000,and $275,000.Based on this information,we know that sales for the remaining firms in the industry are:

Four firms control the market for a particular good,resulting in an HHI of 6,650.Total industry sales are $1,750,and it is known that one firm has sales of $1,400 and another sales of $175.If each of the remaining two firms has the same sales,then we can conclude that the remaining two firms each have a market share of:

Suppose you read in an industry publication that the Rothschild index for the petroleum industry is 0.88.Based on past experience,you know that the price elasticity of demand for the petroleum products sold by your firm is −1.5.Based on this information,you know that the elasticity of demand for a representative firm in the petroleum industry is:

Firms like McDonald's and Wendy's sell hamburgers,salads,and other products that are differentiated in nature.While numerous fast-food restaurants exist in most locations,the differentiated nature of the firms' products permits them to charge prices that are in excess of marginal cost.Given these observations,is the fast-food industry most likely a perfectly competitive industry,a monopoly,monopolistically competitive,or an oligopoly? Use the causal view of structure,conduct,and performance to explain the roles of product differentiation in the industry,and explain how the feedback critique applies in this context.

R&D is an aspect of a firm's:

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?

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

Suppose that the demand in a particular industry is given by Q^d = 500 − 2P.When the market price in the industry is $50 per unit,total demand in the industry is _________.Furthermore,assume that the entire market consists of four firms that share the market equally.The HHI under these conditions is then _________.

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

Advertising is an aspect of a firm's:

Suppose the market for good X has a four-firm concentration ratio of 0.50.Furthermore,assume that total sales in the industry are $1.2 million.Based on this information,we know that sales for the largest four firms in the industry equal (in aggregate):

An industry is comprised of 10 firms,each with an equal market share.What is the four-firm concentration ratio of this industry?

Which of the following is NOT a measure of market structure?

A Herfindahl index of 0 suggests:

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

The idea of improving cash flow by exploiting the cyclical nature of different product lines is represented in:

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?

A firm has a marginal cost of $200 and charges a price of $500.The Lerner index for this firm is: