Question 1

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

Accepted Answer

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

Question 2

The tobacco industry has a Lerner index of 0.76. Based on this information, compute the optimal markup factor.

Accepted Answer

A)  4.17 times price 
B)  4.17 times marginal cost 
C)  0.24 times price 
D)  There is not sufficient information to determine the optimal markup factor. 
A)  4.17 times price 
B)  4.17 times marginal cost 
C)  0.24 times price 
D)  There is not sufficient information to determine the optimal markup factor.

Question 3

Advertising is an aspect of a firm's:

Accepted Answer

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

Question 4

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

Accepted Answer

A)  2,000 
B)  3,300 
C)  10,000 
D)  There is not sufficient information to compute the industry HHI. 
A)  2,000 
B)  3,300 
C)  10,000 
D)  There is not sufficient information to compute the industry HHI.

Question 5

Which of the following is NOT considered a measure of firm conduct?

Accepted Answer

A)  Lerner index of pricing behavior 
B)  Research and development measures 
C)  Advertising measures 
D)  Dansby-Willig index 
A)  Lerner index of pricing behavior 
B)  Research and development measures 
C)  Advertising measures 
D)  Dansby-Willig index

Question 6

As a general rule of thumb, the U.S. Department of Justice views industries to be highly concentrated if the Herfindahl index is:

Accepted Answer

A)  above 1,000. 
B)  below 1,000. 
C)  above 1,800. 
D)  below 1,800. 
A)  above 1,000. 
B)  below 1,000. 
C)  above 1,800. 
D)  below 1,800.

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

Monopolistic competition is characterized by:

Accepted Answer

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

Question 9

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 10

An industry consists of five firms with annual sales of $1,300, $500, $400, $100, and $600. What is the industry's HHI?

Accepted Answer

A)  2,937 
B)  5,654 
C)  10,000 
D)  There is not sufficient information to compute the industry HHI. 
A)  2,937 
B)  5,654 
C)  10,000 
D)  There is not sufficient information to compute the industry HHI.

Question 11

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 12

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 13

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 14

The Dansby-Willig index measures the potential for a change in social welfare by examining the effect of changes in industry:

Accepted Answer

A)  production cost. 
B)  output. 
C)  revenue. 
D)  profit. 
A)  production cost. 
B)  output. 
C)  revenue. 
D)  profit.

Question 15

The products in a monopolistically competitive industry are:

Accepted Answer

A)  homogeneous. 
B)  heterogeneous. 
C)  competitive. 
D)  uncompetitive. 
A)  homogeneous. 
B)  heterogeneous. 
C)  competitive. 
D)  uncompetitive.

Question 16

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

Accepted Answer

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

Question 17

A Herfindahl index of 0 suggests:

Accepted Answer

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

Question 18

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 19

Which of the following integration types aims at reducing transaction costs?

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

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.

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

The tobacco industry has a Lerner index of 0.76. Based on this information, compute the optimal markup factor.

Advertising is an aspect of a firm's:

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

Which of the following is NOT considered a measure of firm conduct?

As a general rule of thumb, the U.S. Department of Justice views industries to be highly concentrated if the Herfindahl index is:

Monopolistic competition is characterized by:

An industry consists of five firms with annual sales of $1,300, $500, $400, $100, and $600. 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:

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:

The Dansby-Willig index measures the potential for a change in social welfare by examining the effect of changes in industry:

The products in a monopolistically competitive industry are:

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

A Herfindahl index of 0 suggests:

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

Which of the following integration types aims at reducing transaction costs?

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

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

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

The tobacco industry has a Lerner index of 0.76. Based on this information, compute the optimal markup factor.

Advertising is an aspect of a firm's:

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

Which of the following is NOT considered a measure of firm conduct?

As a general rule of thumb, the U.S. Department of Justice views industries to be highly concentrated if the Herfindahl index is:

Monopolistic competition is characterized by:

An industry consists of five firms with annual sales of $1,300, $500, $400, $100, and $600. 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:

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:

The Dansby-Willig index measures the potential for a change in social welfare by examining the effect of changes in industry:

The products in a monopolistically competitive industry are:

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

A Herfindahl index of 0 suggests:

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

Which of the following integration types aims at reducing transaction costs?

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

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