Price MC ATC Dold MRold D new Quantity 26) Refer to the figure above. Which of t
ID: 1106795 • Letter: P
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Price MC ATC Dold MRold D new Quantity 26) Refer to the figure above. Which of the following is true? A) The firm was incurring losses before the entry of new firms. B) The firm was earning zero economic profits before the entry of new firms C) The firm is earning positive economic profits after the entry of new firms. D) The firm is earning zero economic profits after the entry of new firms 27) The Herfindahl-Hirschman Index is used to A) measure the price elasticity of demand faced by a firm B) estimate the degree of competition in an industry C) measure the price elasticity of market supply in an industry D) estimate the profit earned by firms in an industry 28) The Herfindahl-Hirschman Index is calculated by A) adding the market share of each firm in the market and squaring the resulting number B) squaring the market share of each firm competing in the market and then summing the resulting numbers C) adding the number of firms in the market and squaring the resulting number D) adding the profit eaned by each firm in the market 29) The automobile industry in Richland has a Herfindabl-Hirschman Index of 5,600. This implies that the A) dominated by a few buyers B) moderately concentrated C) highly concentrated D) perfectly competitiveExplanation / Answer
26) THe answer is D-) The firm is earning zero economic profit after the entry of the new firms.
becasue, after the new firms enter, the demand curve will decrease . when it decreases, the firms price is just equal to the average total cost of the firm. thus firm is earning zero economic profit.
27) THe answer is B-) eastimate the degree of the comeptition in the industry.
because Herfindahl-HIrchman index is used to the compute the comeptition in an industry.
28) The answer is B-) Squaring the market share of each firm competing in the market and then summing the resulting numbers.
29) The answer is C -) highly concentrated.
because we know that when H is above 0.25 or 2500, its indicated highly concentrated market.
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