If the Herfindahl index is the same in two industries, we can conclude that
a. the number of firms in each industry is the same
b. there must not be the same number of firms in the two industries
c. the sum of the squared market shares of all firms is the same in the two industries
d. there must be an identical distribution of market share among firms in the two industries
e. there must be a different distribution of market share among firms in the two industries
QUESTION 2The long-run market supply curve for an increasing-cost, perfectly competitive industry
a. is horizontal
b. slopes upward
c. is the portion of its marginal cost curve above the minimum point on its average variable cost curve
d. is the portion of its marginal cost curve above the minimum point on its average total cost curve
e. is vertical
QUESTION 3Which of the following is a major criticism of a monopoly as a cause of allocative inefficiency?
a. A monopolist fails to expand output to the level where the consumers' evaluation of an additional unit is just equal to its opportunity cost
b. A monopolist has no incentive to produce efficiently, because even if it pays no attention to the costs of production, it will be guaranteed an economic profit
c. A monopolist will always make profits therefore providing an incentive to keep prices at the level that maximizes consumer surplus
d. A monopolist has an advantage because it can purchase the resources in a competitive market
e. Consumer surplus would no longer be equal to producer surplus
QUESTION 4To calculate the Herfindahl index,
a. add the market shares of all firms in an industry
b. add the market shares of any four firms in an industry and then square them
c. add the market shares of the four largest firms in an industry
d. square the market shares of all firms in an industry and then add them
e. square the market shares of the four largest firms in an industry and then add them
QUESTION 5Production of Hollywood movies is an increasing cost industry. Which of the following contributes the most to this condition?
a. The demand for carpenters to build sets
b. The demand for painters to paint the theaters
c. The demand for printers to print tickets
d. The cost of advertising for the shows
e. The cost of hiring known box-office superstars
QUESTION 6A perfectly discriminating monopolist converts every dollar of producer surplus into economic profit.
a. True
b. False
QUESTION 7Which of the following markets would have the highest Herfindahl index? A market with
a. ten firms of widely different sizes
b. ten firms of approximately the same size
c. five firms of widely different sizes
d. five firms of approximately the same size
e. eight firms exactly the same size
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