6. The Herfindahl index is calculated by: (Points : 5) adding the squared value
ID: 1230888 • Letter: 6
Question
6. The Herfindahl index is calculated by: (Points : 5)adding the squared value of the market shares of all the firms in the industry.
multiplying the squared value of the market shares of all the firms in the industry.
adding the percentage of industry output produced by the largest four firms.
adding the percentage of industry output produced by the largest eight firms.
7. In December 2004, the oil producing nations of OPEC began reducing output to keep prices above $40 per barrel. In doing this, OPEC was acting as a monopoly even though there was more than one producer. OPEC is a: (Points : 5)
cartel.
price taker.
producer in a contestable market.
producer in a monopolistically competitive market.
8. The difference between a perfectly competitive firm and a monopolistically competitive firm is that a monopolistically competitive firm faces a: (Points : 5)
horizontal demand curve and price equals marginal cost in equilibrium.
horizontal demand curve and price exceeds marginal cost in equilibrium.
downward-sloping demand curve and price equals marginal cost in equilibrium.
downward-sloping demand curve and price exceeds marginal cost in equilibrium.
9. Suppose an industry only has four firms and they each have 10 percent, 8 percent, 8 percent, and 6 percent of the market. The Herfindahl index of this market is closest to which of the following? (Points : 5)
8
32
66
264
10. A good which if supplied to one person is supplied to all and whose consumption by one individual does not prevent its consumption by another individual is known as: (Points : 5)
a private good.
a public good.
an external good.
an internal good.
11. An effluent fee is: (Points : 5)
a fee requiring market participants to certify they have reduced total consumption-not necessarily their own individual consumption.
charges imposed by government on the level of pollution created.
a fee paid by users of a public good.
charges imposed on the wealthy of our society to help pay for those less fortunate.
Explanation / Answer
6. The Herfindahl index is calculated by:
correct ans-- adding the squared value of the market shares of all the firms in the industry.
7. In December 2004, the oil producing nations of OPEC began reducing output to keep prices above $40 per barrel. In doing this, OPEC was acting as a monopoly even though there was more than one producer. OPEC is a:
correct ans--cartel
8. The difference between a perfectly competitive firm and a monopolistically competitive firm is that a monopolistically competitive firm faces a:
correct ans--downward-sloping demand curve and price exceeds marginal cost in equilibrium.
9. Suppose an industry only has four firms and they each have 10 percent, 8 percent, 8 percent, and 6 percent of the market. The Herfindahl index of this market is closest to which of the following?
correct ans--264
10. good which if supplied to one person is supplied to all and whose consumption by one individual does not prevent its consumption by another individual is known as:
correct ans--a public good
11. An effluent fee is:
correct ans--charges imposed by government on the level of pollution created.
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