A concentration ratio measures
A) the average size of the firms in the industry.
B) the sales of the three largest firms in the industry minus the costs of these three largest firms in the industry.
C) the share of industry sales accounted for by the largest firms in the industry.
D) the excess capacity found in a particular oligopolistic industry.
Answer: C
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Two firms compete in a market by selling imperfect substitutes. The demand equations are given by the following equations:
Q1 = 50 - p1 + p2 Q2 = 50 - p2 + p1 For now, assume that each firm has a marginal cost and average cost of 0. a. From the equations, how can you tell these goods are substitutes? How can you tell they are imperfect substitutes? b. Suppose the firms compete by simultaneously choosing price. Find the best response function of each firm as a function of the other firm's price. c. Compute the equilibrium price and quantity for each firm. d. Suppose firm 1 (and only firm 1 ) had a marginal and average cost of $10. How would the equilibrium change? How does this compare to the Bertrand result when the firms sell perfect substitutes?
The relative price of a textbook is
A) the money price of the textbook divided by the money price of some other good. B) the price of the textbook compared with what students think it should cost. C) the amount it cost to make the textbook. D) what the author earned for writing the textbook.
Universal service may require making a service available in small communities where the limited scale of operations may make costs extremely high
a. True b. False Indicate whether the statement is true or false
Suppose firms A and B both formerly emitted 200 tons of pollution per year, and are both required to reduce pollution emissions by 100 tons per year. Each of these firms are allowed to emit 100 tons per year, and these allowances are tradable. Assume that it costs Firm A $10 per ton to reduce emissions, while it costs Firm B $50 per ton to reduce emissions. If Firm A can reduce its emissions up
to 200 tons, then which of the following is true? a. Efficient emissions trading would generate 100 percent reduction in emissions, and the total cost of reducing total emission would be $6,000. b. Efficient emissions trading would result in firm A buying all 100 tons of pollution allowances from firm B. c. Efficient emissions trading would generate the same 50 percent reduction in emissions, and the total cost of reducing total emissions by 200 tons would be $2000. d. Efficient emissions trading would result in firm A buying all 200 tons of pollution allowances from firm B.