Question 1

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?

Accepted Answer

No, since products are differe...

Question 2

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

Accepted Answer

A)   Entry conditions
B)   Four-firm concentration ratio
C)   Herfindahl-Hirschman index
D)   Pricing behaviorE) All of the above
F) A) and D)

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 four-firm concentration ratio for industry A is:

Accepted Answer

A)   0.9.
B)   1.0.
C)   0.8.
D)   0.7.E) B) and C)
F) A) and D) A

Question 4

Which of the following integration types has the potential problem of increasing the firm's market power?

Accepted Answer

A)   Vertical integration
B)   Horizontal integration
C)   Cointegration
D)   Conglomerate integrationE) All of the above
F) A) and C)

Question 5

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 6

Suppose each of the 50 states had only one gasoline station, and all stations were the same size. The four-firm concentration ratio, based on national data, would be:

Accepted Answer

A)   0.08.
B)   0.16.
C)   0.32.
D)   1.0.E) A) and B)
F) All of the above

Question 7

In perfect competition, which is NOT true?

Accepted Answer

A)   Every firm has a small but perceivable market power.
B)   There are a large number of firms.
C)   Firms are price-takers.
D)   Firms produce homogenous goods.E) B) and C)
F) A) and D)

Question 8

Producer and consumer surpluses are measures of:

Accepted Answer

A)   industry performance.
B)   market structure.
C)   firm conduct.
D)   None of the answers are correct.E) B) and D)
F) A) and B)

Question 9

An industry consists of six firms with annual sales of $300, $500, $400, $700, $600, and $600. What is the industry's C4?

Accepted Answer

A)   0.58
B)   0.62
C)   0.74
D)   0.77E) A) and B)
F) B) and C)

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)   0.8E) B) and D)
F) None of the above

Question 11

Which market structure has the most market power?

Accepted Answer

A)   Monopolistic competition
B)   Perfect competition
C)   Monopoly
D)   OligopolyE) C) and D)
F) B) and C)

Question 12

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.E) A) and D)
F) A) and B) C

Question 13

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 they overstate the actual level of concentration in markets served by foreign firms and they understate the degree of concentration in local markets, such the gasoline market are correct.
D)   None of the statements are correct.E) B) and C)
F) B) and D)

Question 14

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.E) None of the above
F) A) and D)

Question 15

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 B is:

Accepted Answer

A)   0.9.
B)   1.0.
C)   0.8.
D)   0.7.E) All of the above
F) A) and C)

Question 16

The Lerner index in the paper industry is 0.58. Based on this information, a firm charging $3.25 per ream of paper should have a marginal cost of:

Accepted Answer

A)   $0.
B)   $1.365.
C)   $1.885.
D)   $3.25.E) None of the above
F) A) and B) B

Question 17

The concentration and HHI reported in the U.S. Bureau of Census must be interpreted with caution since:

Accepted Answer

A)   they are calculated by excluding foreign imports, hence they bias upward the degree of concentration.
B)   they are based on figures for the entire national market.
C)   the definition of product classes used to define an industry affects the results.
D)   All of the answers are correct.E) C) and D)
F) None of the above

Question 18

Some firms find conglomerate mergers advantageous since they permit firms to:

Accepted Answer

A)   take advantage of economies of scope.
B)   take advantage of economies of scale.
C)   pool cash flows resulting from products with low and high periods.
D)   reduce input costs.E) C) and D)
F) A) and C)

Question 19

A Herfindahl index of 10,000 suggests:

Accepted Answer

A)   perfect competition.
B)   monopolistic competition.
C)   monopoly.
D)   oligopoly.E) All of the above
F) A) and B)

Question 20

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)   1,909E) B) and C)
F) None of the above

Exam 7: The Nature of Industry

Correct Answer
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No, since products are differe...
View Answer

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

Correct Answer
verified

Correct Answer
verified
A

Which of the following integration types has the potential problem of increasing the firm's market power?

Correct Answer
verified

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?

Correct Answer
verified
The Lerner index is (P - MC)/P...
View Answer

Suppose each of the 50 states had only one gasoline station, and all stations were the same size. The four-firm concentration ratio, based on national data, would be:

Correct Answer
verified

In perfect competition, which is NOT true?

Correct Answer
verified

Producer and consumer surpluses are measures of:

Correct Answer
verified

An industry consists of six firms with annual sales of $300, $500, $400, $700, $600, and $600. What is the industry's C₄?

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

Correct Answer
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Which market structure has the most market power?

Correct Answer
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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:

Correct Answer
verified
C

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

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
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The Lerner index in the paper industry is 0.58. Based on this information, a firm charging $3.25 per ream of paper should have a marginal cost of:

Correct Answer
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B

The concentration and HHI reported in the U.S. Bureau of Census must be interpreted with caution since:

Correct Answer
verified

Some firms find conglomerate mergers advantageous since they permit firms to:

Correct Answer
verified

A Herfindahl index of 10,000 suggests:

Correct Answer
verified

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

Correct Answer
verified

Exam 7: The Nature of Industry

Correct AnswerverifiedNo, since products are differe...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedA

Which of the following integration types has the potential problem of increasing the firm's market power?

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedThe Lerner index is (P - MC)/P...View AnswerShow Answer

Suppose each of the 50 states had only one gasoline station, and all stations were the same size. The four-firm concentration ratio, based on national data, would be:

Correct AnswerverifiedShow Answer

In perfect competition, which is NOT true?

Correct AnswerverifiedShow Answer

Producer and consumer surpluses are measures of:

Correct AnswerverifiedShow Answer

An industry consists of six firms with annual sales of $300, $500, $400, $700, $600, and $600. What is the industry's C4?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which market structure has the most market power?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedC

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The Lerner index in the paper industry is 0.58. Based on this information, a firm charging $3.25 per ream of paper should have a marginal cost of:

Correct AnswerverifiedB

The concentration and HHI reported in the U.S. Bureau of Census must be interpreted with caution since:

Correct AnswerverifiedShow Answer

Some firms find conglomerate mergers advantageous since they permit firms to:

Correct AnswerverifiedShow Answer

A Herfindahl index of 10,000 suggests:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answer
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No, since products are differe...
View Answer

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A

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The Lerner index is (P - MC)/P...
View Answer

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An industry consists of six firms with annual sales of $300, $500, $400, $700, $600, and $600. What is the industry's C₄?

Correct Answer
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C

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B

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