Assume the market shares of the six largest firms in an industry are 12 percent each. Calculate the six-firm concentration ratio and Herfindahl-Hirschman index for this industry
What does each of these measures have to say about the degree of concentration in the industry? Explain.
The six-firm concentration ratio for the industry is 72 percent. This suggests a relatively highly concentrated industry because six firms control almost three fourths of the market. The HHI = 864. This number suggests a relatively unconcentrated industry, at least according to the guidelines used by the Department of Justice. Note that when a merger results in an HHI of less than 1,000 the Justice Department will rarely challenge the merger, strongly suggesting that the Department considers an HHI of less than 1000 to reflect a low level of market concentration.
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Which of the following factors is fixed in the long run?
A) capital B) land C) entrepreneurship D) none of the above because all factors are variable in the long run
In a perfectly competitive market, in response to a permanent increase in demand:
a. the short run equilibrium price will be higher than the eventual long run equilibrium price b. the short run equilibrium price will be lower than the eventual long run equilibrium price. c. the short run equilibrium price will be the same as than the eventual long run equilibrium price. d. we cannot know whether the short run equilibrium price will be above, below or equal to the eventual long run equilibrium price.