Discuss the advantages of the Herfindahl-Hirschman Index compared with the four-firm concentration ratio.
What will be an ideal response?
Unlike the four-firm concentration ratio, HHI takes into account data on a much larger percentage of the firms in the market than just the top four. HHI calculation automatically magnifies the weight assigned to the market shares of the larger firms, because the square of a larger number is disproportionately larger than the square of a smaller number. This effect is considered desirable, because these larger firms are the reason the government worries about monopoly power in the market under consideration. It also explains why the HHI works as a measure of concentration. The HHI number rises when concentration grows.
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An increase in cyclical unemployment will result in
A) an increase in structural unemployment. B) an increase in the unemployment rate. C) an increase in the natural rate of unemployment. D) a decrease in frictional unemployment.
Using the Gordon growth formula, if D1 is $2.00, ke is 12% or 0.12, and g is 10% or 0.10, then the current stock price is
A) $20. B) $50. C) $100. D) $150.
Assuming that a society always operates on its production possibilities curve, an inward shift of the curve implies that
A. the country's capacity to produce is fixed. B. the country is not using its resources efficiently. C. the country's capacity to produce has contracted. D. All of the choices are true.
The graph above shows domestic supply and demand with trade in a SMALL country. With trade, this country can purchase at the world price, Pw. Suppose that this country imposes a $5 per unit tariff on this good. Which of the following will NOT occur?
A) Government revenue will increase. B) Domestic consumers will be worse off. C) Domestic producers will be better off. D) The gains to the winners will exceed the losses to the losers from the tariff.