Suppose that two clothing manufacturers, Frederick's Fashions and Stephan's Styles, announce that they plan to merge. The Herfindahl-Hirschman index is currently 1,500. After the merger, the HHI will rise to 1,560. This market is
A) highly concentrated and so the government will definitely challenge the merger.
B) moderately concentrated and because the merger increases the HHI by more than 50 points, the government will definitely challenge the merger.
C) moderately concentrated, but because the merger increases the HHI by less than 100 points, the government will probably not challenge the merger.
D) competitive and so the government will not challenge the merger.
Ques. 2Netflix is the largest online DVD rental service offering flat rate online streaming to customers in the United States. Currently, there are approximately 8 million subscribers.
Suppose Netflix decreases its flat rate rental by 10 percent and an additional 1 million people subscribe. This information means that Netflix's demand is A) elastic.
B) inelastic.
C) unit elastic.
D) perfectly elastic.
Ques. 3If the government regulates the market in the above figure in a way to achieve efficiency, then ________ tons of paper will be produced and consumed.
A) 0
B) 100
C) 200
D) None of the above answers is correct.
Ques. 4Why do rent ceilings lead to shortages and black markets?
What will be an ideal response?
Ques. 5The vertical distance between a firm's average total cost curve, ATC, and its average variable cost curve, AVC
A) decreases as output increases.
B) is equal to its marginal cost, MC.
C) is equal to its total fixed cost, TFC.
D) is equal to its average product.
Ques. 6The existence of a union
A) has no effect on labor supply and demand.
B) affects labor supply only.
C) affects labor demand only.
D) can affect both labor supply and labor demand.
Ques. 7What is the significance of the concepts consumer surplus and producer surplus?
What will be an ideal response?
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