One advantage of the Herfindahl index over the concentration ratio is that it:
A. gives extra weight to firms that are especially large.
B. is easier to calculate.
C. tells about only the top 50 firms in an industry.
D. takes into account only the leading firms in an industry.
Answer: A
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Assuming that firms do not collude, compare the market outcome under oligopoly with the outcome under perfect competition
What will be an ideal response?
You could conclude that
A. new firms will enter the industry.
B. existing firms will leave the industry.
C. the industry is in the long run.
D. it is unclear whether the industry is in the short run or the long run.
For a monopolistically competitive firm
A. price is greater than marginal revenue at all levels of output except for the first unit. B. price equals marginal revenue at all levels of output. C. price is less than marginal revenue at all levels of output. D. the demand curve is perfectly inelastic and marginal revenue is zero.
Before entering, fixed cost associated with the industry in question are sunk costs for
A) the incumbent firm. B) the outside firm. C) both firms. D) neither firm.