Question 1

The widget industry is comprised of six firms of varying sizes.Firm 1 has 35 percent of the market.Firm 2 has 25 percent, and the remaining firms have 10 percent each.What is the Herfindahl-Hirschman index for the widget industry? Based on the U.S.Department of Justice merger guidelines described in the text, do you think the Justice Department would be likely to block a merger between firms 5 and 6?

Accepted Answer

The answer of The widget industry is comprised of six...

Question 2

"The law of comparative advantage suggests that managers should specialize in learning the tools needed to manage either a monopoly, oligopoly, monopolistically competitive, or perfectly competitive firm." Do you agree with this statement? Explain.

Accepted Answer

The answer of "The law of comparative advantage suggests that...

Question 3

Alpha Industries operates in a highly competitive market.While there are few other firms in the industry due to the high fixed costs of building plants, rival firms are very aggressive in their pricing strategies.Of the products sold in the industry, over 80 percent have 10 years of patent protection remaining.Does this industry meet an economist's definition of a perfectly competitive industry?

Accepted Answer

The answer of Alpha Industries operates in a highly competitive...

Question 4

In Tuna, Texas, the retail gasoline market consists of six firms.Firm 1 has 35 percent of the market, Firm 2 has 25 percent, and the remaining firms have 10 percent each.What is the four-firm concentration ratio for this industry?

Accepted Answer

The answer of In Tuna, Texas, the retail gasoline market...

Question 5

Zelda Manufacturing has a rather unique product that sells for $15 per unit, and the marginal cost is $7.50.Determine the Lerner index for Zelda Manufacturing.Does this index indicate market power?

Accepted Answer

The answer of Zelda Manufacturing has a rather unique product...

Question 6

It is sometimes said that a manager of a monopoly can charge any price and customers will still have to buy the product.Do you agree or disagree? Why?

Accepted Answer

The answer of It is sometimes said that a manager...

Question 7

Firms like McDonald's and Wendy's sell hamburgers, salads, and other products that are differentiated in nature.While numerous fast-food restaurants exist in most locations, the differentiated nature of the firms' products permits them to charge prices that are in excess of marginal cost.Given these observations, is the fast-food industry most likely a perfectly competitive industry, a monopoly, monopolistically competitive, or an oligopoly? Use the causal view of structure, conduct, and performance to explain the roles of product differentiation in the industry, and explain how the feedback critique applies in this context.

Accepted Answer

The answer of Firms like McDonald's and Wendy's sell hamburgers,...

Question 8

The Beta Corporation operates in an industry that has a Herfindahl-Hirschman index of 800.Beta wants to merge with Alpha Enterprises, but Alpha has argued that the merger will be blocked by the Justice Department.Are there conditions under which the Justice Department would allow the merger? Explain.

Accepted Answer

The answer of The Beta Corporation operates in an industry...

Question 9

Omega Travel competes in the highly competitive market for travel.Consumers know that Omega has the best agents in the industry and offers superior service.Nonetheless, Omega earns zero economic profits because numerous competitors have entered the market over the last few years.Based on this information, does Omega operate in a perfectly competitive market? Why or why not?

Accepted Answer

The answer of Omega Travel competes in the highly competitive...

Question 10

Borris Industries operates in an industry that has a Rothschild index of 0.75.The firm gained access to a government report that revealed the own-price elasticity of market demand within the industry to be -3.Use this information to obtain an estimate of the own-price elasticity of demand for the product produced by Borris Industries.

Accepted Answer

The answer of Borris Industries operates in an industry that...

Question 11

Determine whether integration between the following types of firms would constitute a horizontal, vertical, or conglomerate merger.
a.A food company and a drug company.
b.A milk producer and a cheese producer.
c.A computer chip manufacturer and a silicon producer.

Accepted Answer

The answer of Determine whether integration between the following types...

Question 12

R&D is an aspect of a firm's:

Accepted Answer

Research and Development (R&D) is an aspect of a firm's conduct, as it involves the actions and strategies a company undertakes to innovate and develop new products or improve existing ones.

Question 13

During a sales meeting one of the regional managers of Toga Industries remarked that structural variables such as advertising and R&D activities by rival firms were likely to hamper the firm's sales over the next year.The manager received numerous stares after making the remarks.Why?

Accepted Answer

The answer of During a sales meeting one of the...

Question 14

Advertising is an aspect of a firm's:

Accepted Answer

Advertising is considered an aspect of a firm's conduct because it involves the actions and strategies a firm employs to reach its customers, including how it markets and promotes its products or services.

Question 15

A host of best-selling books advance the thesis that increases in conglomerate mergers and concentration of U.S.industry are responsible for "obscene profits." Do you agree? Explain, using the Lerner index.

Accepted Answer

The answer of A host of best-selling books advance the...

Question 16

Producer and consumer surpluses are measures of

Accepted Answer

Producer and consumer surpluses are measures of the performance of an industry. They represent the difference between what consumers are willing to pay for a good or service and what producers are willing to accept for the same good or service. This difference can be used to evaluate the efficiency of the market and the overall welfare of consumers and producers within the industry.

Question 17

Star Computer and a small telecommunications company are considering a merger.A socially minded member of Star Computer's board of directors is against the merger, however, because she is concerned that the merger might not benefit society as a whole.Provide the board member with an argument for why it may be socially beneficial for the merger to take place.

Accepted Answer

The answer of Star Computer and a small telecommunications company...

Quiz 7: The Nature of Industry