Multiple Choice
The average PCM (percentage contribution margin) in a Cournot equilibrium is given by the formula PCM=H/η,where H is the Herfindahl index and η is the price elasticity of market demand.Given this equation,which of the following statements is true?
A) The more concentrated the industry,the smaller the PCMs in equilibrium
B) The industry concentration only raises the PCMs in equilibrium
C) The industry concentration has no bearing on PCM size in equilibrium
D) The less concentrated the industry,the larger the PCMs in equilibrium
E) The less concentrated the industry,the smaller the PCMs in equilibrium
Correct Answer:
Verified
Correct Answer:
Verified
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