The causal 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)||All of the above can occur according to the casual view.|
As a general rule of thumb, the U.S. Department of Justice may scrutinize a proposed merger if the Herfindahl-Hirschman index is
A firm has a marginal cost of $22 and charges a price of $35. The Lerner index for this firm is:
The industry elasticity of demand for gadgets is -3, while the elasticity of demand for an individual gadget manufacturer's product is -3. 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 Herfindahl index for this industry is 3.|
|D)||the Herfindahl index for this industry is -3.|
The concentration and Herfindahl-Hirschman indices computed by the U.S. Bureau of Census must be interpreted with caution because
|A)||they may understate the actual level of concentration in markets served by foreign firms.|
|B)||national data tends to overstate 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 above.|
In regards to perfect competition, 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 one.|
|D)||None of the above.|
Use the following information for questions 7, 8, and 9.
There are five firms in an industry with sales at $6 million, $6 million, $4 million, $4 million, and $4 million, respectively.