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| 1 | |
The "feedback critique" view of the industry believes that |
| | A) | market structure causes firm behavior, which causes market performance. |
| | B) | firm behavior causes market structure, which causes market performance. |
| | C) | market performance causes market structure, which causes firm behavior. |
| | D) | there is no one-way causal link among market structure, conduct and performance. |
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| 2 | |
As a general rule of thumb, the U.S. Department of Justice is unlikely to scrutinize a proposed merger if the post-merger, Herfindahl-Hirschman index is |
| | A) | above 1,500. |
| | B) | below 1,500. |
| | C) | above 2,500. |
| | D) | below 2,500. |
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| 3 | |
A firm has a marginal cost of $56 and charges a price of $64. The Lerner index for this firm is: |
| | A) | 0.143. |
| | B) | 0.125. |
| | C) | 0.56. |
| | D) | 0.35. |
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| 4 | |
The industry elasticity of demand for X is -3, while the elasticity of demand for an individual manufacturer of product X is -12. Based on the Rothschild approach to measuring market power, we conclude that |
| | A) | there is significant monopoly power in this industry. |
| | B) | the industry is competitive. |
| | C) | the four-firm concentration ratio for this industry is 0.25. |
| | D) | the Herfindahl index for this industry is 2500. |
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| 5 | |
The concentration and Herfindahl-Hirschman indices computed by the U.S. Bureau of Census must be interpreted with caution because |
| | A) | they may overstate the actual level of concentration in markets served by foreign firms. |
| | B) | national data tends to understate the degree of concentration when the relevant markets are local. |
| | C) | the definition of product classes used to define an industry affects the results. |
| | D) | All of the responses are correct. |
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| 6 | |
In regards to monopoly, which of the following is true? |
| | A) | The HHI tends to be close to 10,000. |
| | B) | The Rothschild index tends to be close to zero. |
| | C) | The four-firm concentration ratio tends to be close to zero. |
| | D) | None of the responses are correct. |
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| 7 | |
There are five firms in an industry with sales at $5 million, $10 million, $8 million, $12 million, and $10 million, respectively. The four-firm concentration ratio is: |
| | A) | 0.75. |
| | B) | 0.73. |
| | C) | 1.20. |
| | D) | 0.89. |
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| 8 | |
There are five firms in an industry with sales at $5 million, $10 million, $8 million, $12 million, and $10 million, respectively. The HHI is |
| | A) | 1,805. |
| | B) | 925. |
| | C) | 2,014. |
| | D) | 2,138. |
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| 9 | |
There are five firms in an industry with sales at $5 million, $10 million, $8 million, $12 million, and $10 million, respectively.
What is the proper conclusion that we can draw from the calculated four-firm concentration ratio and HHI? |
| | A) | Both measures indicate that the industry is not perfectly competitive. |
| | B) | The four-firm measure suggests the industry is highly competitive, while the HHI suggests the industry is relatively uncompetitive. |
| | C) | The four-firm measure suggests the industry is relatively uncompetitive, while the HHI suggests the industry is highly competitive. |
| | D) | Both measures indicate the industry is served by a monopoly. |
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| 10 | |
If you were to read in the business section of your local newspaper that a recent merger has led to an industry having a HHI measure equal to 175, what is the proper conclusion? |
| | A) | The market is now monopolistically competitive. |
| | B) | The market is now close to perfectly competitive. |
| | C) | The market is now served by a monopoly. |
| | D) | The newspaper has made a mistake in reporting the HHI measure. |
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| 11 | |
A vertical merger is the integration of |
| | A) | two or more firms that produce components for a single product. |
| | B) | the production of similar products into a single firm. |
| | C) | different product lines into a single firm. |
| | D) | None of the responses are correct. |
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| 12 | |
According to the "causal view" of industry |
| | A) | the conduct of firms affects firm performance, which impacts market structure. |
| | B) | the performance of firms affects market structure. |
| | C) | market structure causes market performance, which impacts firm conduct. |
| | D) | None of the responses are correct. |
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| 13 | |
An industry is comprised of sixteen (16) firms, each with an equal market share. What is the 4-firm concentration ratio of this industry? |
| | A) | 0.125. |
| | B) | 0.25. |
| | C) | 0.50. |
| | D) | 0.64. |
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| 14 | |
Which of the following industry structures would you expect to have the highest Rothschild index score? |
| | A) | Monopoly. |
| | B) | Perfect competition. |
| | C) | Monopolistic competition. |
| | D) | Oligopoly. |
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| 15 | |
The Dansby-Willig performance index measures by how much |
| | A) | consumer surplus will increase if firms operating within an industry decreased output. |
| | B) | consumer and producer surpluses will increase if firms operating within an industry produced the socially efficient output level. |
| | C) | price of an entire product group will change relative to the impact of a price change of a single firm. |
| | D) | the Herfindahl-Hirshman index will change by adding another firm to the industry. |
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