Suppose the refrigerator industry has an HHI of 2,500 while the aluminum industry's HHI is 6,850 . Is this information sufficient to conclude that the aluminum market is more concentrated than market for refrigerators? Explain your answer
What will be an ideal response?
An HHI of 2,500 does not in itself mean that the market is highly concentrated. For example, if there are only four firms in an industry, and each firm supplies 25% of the market, intense competition can actually exist among these four firms. This may be sufficient to drive the market equilibrium toward a competitive outcome. Empirical research has shown that the number of firms does not have to be very large to bring prices close to the competitive level.
Chapter 15
Trade-offs Involving Time and Risk
Questions
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Which of the following statements is true?
A) Employers are willing to forego profits when engaging in special interest group discrimination. B) Employers are willing to forego profits when engaging in cultural discrimination. C) Employers are willing to forego profits when engaging in statistical discrimination. D) Employers are willing to forego profits when engaging in taste-based discrimination.
When an economy is operating at the steady state, we know that
A) steady state saving equals consumption. B) steady state saving is less than total consumption. C) steady state saving is equal to depreciation per worker. D) steady state saving exceeds depreciation each year by a constant amount. E) none of the above