Suppose the refrigerator industry has an HHI of 2,500 while the aluminum industry's HHI is 6,850 . Is this information sufficient to conclude that the aluminum market is more concentrated than market for refrigerators? Explain your answer
What will be an ideal response?
An HHI of 2,500 does not in itself mean that the market is highly concentrated. For example, if there are only four firms in an industry, and each firm supplies 25% of the market, intense competition can actually exist among these four firms. This may be sufficient to drive the market equilibrium toward a competitive outcome. Empirical research has shown that the number of firms does not have to be very large to bring prices close to the competitive level.
Chapter 15
Trade-offs Involving Time and Risk
Questions
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The aggregate demand curve shows the alternative combinations of the price level and real income that result in simultaneous equilibrium in both the goods and money markets
Indicate whether the statement is true or false
The incorrect presumption that because two events tend to occur together, one must cause the other is the:
A) confusion of economists. B) blunder of science. C) fallacy of false cause. D) error of inclusion.
Suppose the auto industry has several investment projects with an expected rate of return of 15 percent, the aluminum industry has projects with an expected return of over 20 percent, the publishing industry has projects with an expected return of 10 percent, the steel industry has projects with an expected return of 7 percent and the rubber industry has projects with an expected return of 5 percent. The current market rate of interest is 7 percent. A reduction in the supply of funds causes interest rates to rise to 11 percent. The effect is to
A. force the firms in the automobile industry and the publishing industry to rely on funding their projects through other means. B. cause the firms in the steel and the rubber industries to go ahead with their projects. C. make the projects of the aluminum industry and the steel industry unprofitable; the firms in these industries will not borrow the funds or make the investments. D. cause the firms in the steel and publishing industries to cancel their projects, which would have been funded at the old interest rate.
If voters do not have single-peaked preferences then a cyclical majority will arise
a. True b. False