MCQs and Quizzes - Multiple Choice Questions with Answers

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Industry Y is dominated by five large firms that hold market shares of 20, 20, 25, 25, and 10. The Herfindahl index for this industry is:

  • A. 1560.
  • B. 2150
  • C. 2340
  • D. 3500
  • Correct Answer: Option B

Industry X is dominated by four large firms that hold market shares of 30, 30, 20, and 20. The Herfindahl index for this industry is:

  • A. 100.
  • B. 2600
  • C. 3200
  • D. 4400
  • Correct Answer: Option B

You are told that the four-firm concentration ratio in an industry is 20. Based on this information you can conclude that the industry is:

  • A. concentrated because each firm has 20 percent of industry sales.
  • B. concentrated because the four largest firms account for 80 percent of the industry sales.
  • C. not concentrated because the four largest firms account for 20 percent of industry sales.
  • D. not concentrated because each firm only accounts for 5 percent of industry sales.
  • Correct Answer: Option C

The Herfindahl index is a measure of:

  • A. profitability in an industry.
  • B. the price level in an industry.
  • C. kinked demand in an industry.
  • D. market power in an industry.
  • Correct Answer: Option D

Assume that an industry is significantly affected by import competition from foreign suppliers. Taking this factor into account, it would mean that:

  • A. the Herfindahl index would be significantly higher in that industry because there are more firms in the industry.
  • B. the industry is less concentrated than suggested by domestic concentration ratios.
  • C. there is a high degree of interindustry competition.
  • D. there is a low degree of interindustry competition.
  • Correct Answer: Option B

The increased use of plastic bags instead of paper bags in grocery stores and retail shops is an example of:

  • A. overt collusion.
  • B. covert collusion
  • C. import competition
  • D. interindustry competition.
  • Correct Answer: Option D

The following are the respective numbers for the four-firm concentration ratio and Herfindahl index in an industry. Which set of numbers would indicate that the industry is oligopolistic?

  • A. 10 and 50
  • B. 24 and 263
  • C. 25 and 207
  • D. 77 and 1807
  • Correct Answer: Option D

In an oligopolistic industry, the four-firm concentration ratio would be:

  • A. high, and the Herfindahl index would be high.
  • B. high, and the Herfindahl index would be low.
  • C. low, and the Herfindahl index would be high.
  • D. low, and the Herfindahl index would be low.
  • Correct Answer: Option A

Which industry would be considered to be oligopolistic based on the four-firm concentration ratio and the Herfindahl index data?

  • A. textile bags
  • B. bolts, nuts, and rivets
  • C. ready mix concrete
  • D. glass containers
  • Correct Answer: Option D

The larger the Herfindahl index, the:

  • A. less the degree of import competition in an industry.
  • B. greater the degree of import competition in an industry.
  • C. less the degree of market power in an industry.
  • D. greater the degree of market power in an industry.
  • Correct Answer: Option D