The breakfast cereal industry has a four-firm concentration ratio of 80 percent. Is this enough information to classify the industry as an oligopoly? Is a high concentration ratio evidence that an industry is not competitive?
What will be an ideal response?
Most economists classify an industry with a four-firm concentration ratio greater than 40 percent as an oligopoly; therefore, the breakfast cereal industry would be considered an oligopoly. But the concentration ratio is a flawed measure of the extent of competition in the breakfast cereal industry. For example, concentration ratios do not include sales in the United States by foreign firms, so to the extent that foreign firms sell breakfast cereal in the United States, the concentration ratio understates the degree of competition in this industry. Also, since concentration ratios are calculated for the national market, regional or local competition is ignored. Concentration ratios are useful for providing a general idea of the extent of competition in an industry.
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Max has allocated $100 toward meats for his barbecue. His budget line and an indifference map are shown in the above figure. What happens if Max's mother gives him 30 pounds of burger?
A) Max would have preferred receiving the dollar-value of the burger. B) Max is indifferent between this gift and the dollar-value of the burger. C) Max prefers this gift to the dollar-value of the burger. D) None of the above.
PPP-adjustment involves:
A. recalculating economic statistics to account for differences in price levels across countries. B. a method very similar to adjusting to cost-of-living increases using a price index like the CPI. C. recalculating a variable like GDP per capita so we can compare someone's standard of living across countries. D. All of these statements are true.
What are the conditions that an exchange must satisfy in order to make two individuals participate in it?
Assume the standard trade model with two countries (Alpha and Beta), two goods (food and drink), and two factors of production (land and labor). Further assume that Alpha is relatively labor-abundant and food is relatively land-intensive. If the countries engage in free trade, Alpha will
A. import both goods. B. export food and import drink. C. export drink and import food. D. export both food and drink.