SampleExam2 - Sample Exam 2 1. An industry is comprised of...

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1 Sample Exam 2 1. An industry is comprised of 20 firms, each with an equal market share. What is the 4-firm concentration ratio of this industry? A. 0.2 B. 0.4 C. 0.6 D. 0.8 2. An unregulated industry has a Lerner index of zero. These numbers: A. Reveal that social welfare would be improved by regulating the firms B. Are consistent with the industry being monopolistically competitive C. Are consistent with the industry being perfectly competitive D. Reveal that social welfare would be improved by regulating the firms and are consistent with the industry being monopolistically competitive 3. Suppose that there are two industries, A and B. There are five firms in industry A with sales at $5 million, $2 million, $1 million, $1 million, and $1 million, respectively. There are 4-firms in industry B with equal sales of $2.5 million for each firm. The four-firm concentration ratio for industry A is: A. 0.9 B. 1.0 C. 0.8 D. 0.7 4. As a general rule of thumb, industries with a Herfindahl index below ______ are considered to be competitive, while those above ______ are considered non-competitive. A. 1,000, 1,800 B. 1,800, 1,000 C. 1,000, 3,000 D. 1,800, 3,000 5. When the relevant markets are local, the concentration and HHI based on figures for the entire United States tend to: A. Be biased downward B. Be biased upward C. Give a more precise description of the real situation D. Ignore the presence of import goods
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2 6. The industry elasticity of demand for telephone service is -2 while the elasticity of demand for a specific phone company is -5. What is the Rothchild index? A. 0.2 B. 0.4 C. 0.5 D. 0.7 7. According to the "feedback critique" A. The conduct of firms may affect firm performance B. The conduct of firms may affect market structure C. Market structure may affect the firm's conduct D. All of the statements associated with this question are correct 8. You are the manager of a firm that produces output in two plants. The demand for your firm's product is P = 78 - 15Q, where Q = Q 1 + Q 2 . The marginal cost associated with producing in the two plants are MC 1 = 3Q 1 and MC 2 = 2Q 2 . What price should be charged in order to maximize revenues ? A. $39 B. $47 C. $52 D. $56 9. You are the manager of a firm that sells its product in a competitive market at a price of $50. Your firm's cost function is C = 40 + 5Q 2 . Your firm's maximum profits are A. 125 B. 250 C. 100 D. 85 10. Which of the following is true? A. A monopolist produces on the inelastic portion of its demand B. A monopolist always earns an economic profit C. The more inelastic the demand, the closer marginal revenue is to price D. In the short run a monopoly will shutdown if P < AVC 11. If a monopolistically competitive firm's marginal cost increases, then in order to maximize profits the firm will A. Reduce output and increase price B. Increase output and decrease price C. Increase both output and price D. Reduce both output and price
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3 12. The primary difference between Monopolistic Competition and Perfect Competition is
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SampleExam2 - Sample Exam 2 1. An industry is comprised of...

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