Question 1

Pricing is an aspect of a firm's:

Accepted Answer

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

Question 2

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.

Accepted Answer

Set .75 =

Question 3

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 four firms in industry B with equal sales of $2.5 million for each firm. The HHI for industry A is:

Accepted Answer

A)  3,200. 
B)  2,800. 
C)  1,800. 
D)  2,500. 
A)  3,200. 
B)  2,800. 
C)  1,800. 
D)  2,500.

Question 4

The industry elasticity of demand for good Y is −3,while the elasticity of demand for an individual manufacturer of good Y is −12.Based on the Rothschild approach to measuring market power,we conclude that:

Accepted Answer

A)  1/4, indicating there is significant monopoly power in this industry. 
B)  1/4, indicating there is little monopoly power in this industry. 
C)  4, indicating there is little monopoly power in this industry. 
D)  None of the answers are correct. 
A)  1/4, indicating there is significant monopoly power in this industry. 
B)  1/4, indicating there is little monopoly power in this industry. 
C)  4, indicating there is little monopoly power in this industry. 
D)  None of the answers are correct.

Question 5

An unregulated industry has a Lerner index of zero.These numbers:

Accepted Answer

A)  reveal that social welfare would be improved by regulating the firms. 
B)  are consistent with the industry being monopolistically competitive. 
C)  are consistent with the industry being perfectly competitive. 
D)  reveal that social welfare would be improved by regulating the firms and are consistent with the industry being monopolistically competitive. 
A)  reveal that social welfare would be improved by regulating the firms. 
B)  are consistent with the industry being monopolistically competitive. 
C)  are consistent with the industry being perfectly competitive. 
D)  reveal that social welfare would be improved by regulating the firms and are consistent with the industry being monopolistically competitive.

Question 6

The chemical industry has a Lerner index of 0.67.Based on this information,a firm with marginal cost of $10 should charge a price of:

Accepted Answer

A)  $30.30. 
B)  $14.93. 
C)  $6.70. 
D)  $3.30. 
A)  $30.30. 
B)  $14.93. 
C)  $6.70. 
D)  $3.30.

Question 7

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 $2,000,000,$2,250,000,$2,500,000,and $2,750,000.Based on this information,we know that sales for the remaining firms in the industry are:

Accepted Answer

A)  $9,433,320. 
B)  $6,875,000. 
C)  $5,505,000. 
D)  $4,071,430. 
A)  $9,433,320. 
B)  $6,875,000. 
C)  $5,505,000. 
D)  $4,071,430.

Question 8

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 the Rothschild index is:

Accepted Answer

A)  0.833. 
B)  1.20. 
C)  −1.20. 
D)  −0.833. 
A)  0.833. 
B)  1.20. 
C)  −1.20. 
D)  −0.833.

Question 9

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 four firms in industry B with equal sales of $2.5 million for each firm. The four-firm concentration ratio for industry A is:

Accepted Answer

A)  0.9. 
B)  1.0. 
C)  0.8. 
D)  0.7. 
A)  0.9. 
B)  1.0. 
C)  0.8. 
D)  0.7.

Question 10

An industry is comprised of 20 firms,each with an equal market share.What is the four-firm concentration ratio of this industry?

Accepted Answer

A)  0.2 
B)  0.4 
C)  0.6 
D)  0.8 
A)  0.2 
B)  0.4 
C)  0.6 
D)  0.8

Question 11

Holding all else constant,higher prices will:

Accepted Answer

A)  increase the Lerner index. 
B)  decrease the Lerner index. 
C)  have no impact on the Lerner index. 
D)  increase or decrease the Lerner index depending on the relative magnitude of the price increase. 
A)  increase the Lerner index. 
B)  decrease the Lerner index. 
C)  have no impact on the Lerner index. 
D)  increase or decrease the Lerner index depending on the relative magnitude of the price increase.

Question 12

A firm has a Lerner index of 0.75 and charges a price of $150.The firm's marginal cost is:

Accepted Answer

A)  $0. 
B)  $37.50. 
C)  $112.50. 
D)  There is not sufficient information to determine the firm's marginal cost. 
A)  $0. 
B)  $37.50. 
C)  $112.50. 
D)  There is not sufficient information to determine the firm's marginal cost.

Question 13

Four firms control the market for a particular good,resulting in an HHI of 2,900.Total industry sales are $500,and it is known that two firms each have sales of $175.If each of the remaining two firms have the same sales,then we can conclude that the remaining two firms each have a market share of:

Accepted Answer

A)  $125. 
B)  $75. 
C)  0.15. 
D)  0.50. 
A)  $125. 
B)  $75. 
C)  0.15. 
D)  0.50.

Question 14

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 four firms in industry B with equal sales of $2.5 million for each firm. The HHI for industry B is:

Accepted Answer

A)  2,500. 
B)  1,800. 
C)  3,200. 
D)  2,800. 
A)  2,500. 
B)  1,800. 
C)  3,200. 
D)  2,800.

Question 15

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

Accepted Answer

A)  2,000 
B)  2,500 
C)  10,000 
D)  There is not sufficient information to compute the industry HHI. 
A)  2,000 
B)  2,500 
C)  10,000 
D)  There is not sufficient information to compute the industry HHI.

Question 16

The industry elasticity of demand for telephone service is −2,while the elasticity of demand for a specific phone company is −5.What is the Rothchild index?

Accepted Answer

A)  0.2 
B)  0.4 
C)  0.5 
D)  0.7 
A)  0.2 
B)  0.4 
C)  0.5 
D)  0.7

Question 17

A firm's average cost is $20,and it charges a price of $20.The Lerner index for this firm is:

Accepted Answer

A)  0.20. 
B)  0.50. 
C)  0.33. 
D)  insufficient information. 
A)  0.20. 
B)  0.50. 
C)  0.33. 
D)  insufficient information.

Question 18

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 19

An electronics 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 20

Four firms control the market for a particular good,resulting in an HHI of 2,800.Total industry sales are $750,and it is known that one firm has sales of $300.If each of the remaining three firms has the same sales,then we can conclude that the remaining three firms each have a market share of:

Accepted Answer

A)  $205. 
B)  $100. 
C)  0.20. 
D)  0.40. 
A)  $205. 
B)  $100. 
C)  0.20. 
D)  0.40.

Pricing is an aspect of a firm's:

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 four firms in industry B with equal sales of $2.5 million for each firm. The HHI for industry A is:

The industry elasticity of demand for good Y is −3,while the elasticity of demand for an individual manufacturer of good Y is −12.Based on the Rothschild approach to measuring market power,we conclude that:

An unregulated industry has a Lerner index of zero.These numbers:

The chemical industry has a Lerner index of 0.67.Based on this information,a firm with marginal cost of $10 should charge a price of:

An industry is comprised of 20 firms,each with an equal market share.What is the four-firm concentration ratio of this industry?

Holding all else constant,higher prices will:

A firm has a Lerner index of 0.75 and charges a price of $150.The firm's marginal cost is:

Four firms control the market for a particular good,resulting in an HHI of 2,900.Total industry sales are $500,and it is known that two firms each have sales of $175.If each of the remaining two firms have the same sales,then we can conclude that the remaining two firms each have a market share of:

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 four firms in industry B with equal sales of $2.5 million for each firm. The HHI for industry B is:

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

The industry elasticity of demand for telephone service is −2,while the elasticity of demand for a specific phone company is −5.What is the Rothchild index?

A firm's average cost is $20,and it charges a price of $20.The Lerner index for this firm is:

In perfect competition,which is NOT true?

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

Four firms control the market for a particular good,resulting in an HHI of 2,800.Total industry sales are $750,and it is known that one firm has sales of $300.If each of the remaining three firms has the same sales,then we can conclude that the remaining three firms each have a market share of:

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

Pricing is an aspect of a firm's:

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 four firms in industry B with equal sales of $2.5 million for each firm. The HHI for industry A is:

The industry elasticity of demand for good Y is −3,while the elasticity of demand for an individual manufacturer of good Y is −12.Based on the Rothschild approach to measuring market power,we conclude that:

An unregulated industry has a Lerner index of zero.These numbers:

The chemical industry has a Lerner index of 0.67.Based on this information,a firm with marginal cost of $10 should charge a price of:

An industry is comprised of 20 firms,each with an equal market share.What is the four-firm concentration ratio of this industry?

Holding all else constant,higher prices will:

A firm has a Lerner index of 0.75 and charges a price of $150.The firm's marginal cost is:

Four firms control the market for a particular good,resulting in an HHI of 2,900.Total industry sales are $500,and it is known that two firms each have sales of $175.If each of the remaining two firms have the same sales,then we can conclude that the remaining two firms each have a market share of:

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 four firms in industry B with equal sales of $2.5 million for each firm. The HHI for industry B is:

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

The industry elasticity of demand for telephone service is −2,while the elasticity of demand for a specific phone company is −5.What is the Rothchild index?

A firm's average cost is $20,and it charges a price of $20.The Lerner index for this firm is:

In perfect competition,which is NOT true?

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

Four firms control the market for a particular good,resulting in an HHI of 2,800.Total industry sales are $750,and it is known that one firm has sales of $300.If each of the remaining three firms has the same sales,then we can conclude that the remaining three firms each have a market share of:

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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