Whenever any firms in a concentrated industry merge, the Herfindahl-Hirschman Index:
a. will rise.
b. may rise or stay the same.
c. may rise or fall.
d. will fall.
QUESTION 2Which of the following theories states that people who are highly risk-averse are less likely to engage in high-risk activities?
a. The theory of moral hazard
b. The theory of adverse selection
c. The propitious selection theory
d. The death spiral theory
QUESTION 3The CEO and stockholders talk almost everyday.
Indicate whether the statement is true or false
QUESTION 4Whenever any firms in a concentrated industry merge, the four firm concentration ratio:
a. will rise.
b. may rise or stay the same.
c. may rise or fall.
d. will fall.
QUESTION 5According to the theory of propitious selection:
a. risk-neutral people are more likely to opt for insurance coverage.
b. risk-averse people are more likely to opt for insurance coverage.
c. high-risk people submit large claims for insurance coverage.
d. high-risk people submit smaller claims for insurance coverage.
QUESTION 6Supply chain is the entire vertical process of a firm.
Indicate whether the statement is true or false
QUESTION 7If the four firms in an industry represented 40, 30, 20, and 10 of the market, respectively, what would be the Herfindahl-Hirschman Index for this industry? What if the largest firm then divested into two equal sized companies?
a. 3,000 . 2,300.
b. 2,300; 3,000
c. 3,000 . 5,400
d. 2,300; 5,400
QUESTION 8Adverse selection can occur if:
a. high-risk persons insure themselves more heavily than low-risk persons.
b. high-risk persons claim coverage which cannot be borne by the insurers.
c. high-risk persons do not conceal information from the insurer.
d. high-risk persons make an effort to take less risk in the presence of an insurance cover.
Quick Reply
