Reading 16: Organizing Production LOS f习题精选 interpret, following, describes, 2010

honeycfa

LOS f: Calculate and interpret the four-firm concentration ratio and the Herfindahl-Hirschman Index and discuss the limitations of concentration measures.

Which of the following best describes the relationship between the indicated type of market and the Herfindahl-Hirschman Index, respectively?

A) Monopolistic competition; 100.

B) Perfect competition; 1,800.

C) Monopoly; 10,000.

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The Herfindahl-Hirschman Index (HHI) has a theoretical range of near zero to 10,000. The HHI is very low in a highly competitive and increases to 10,000 (=100%²) for an industry with only one firm, e.g., a monopoly. An HHI between 1,000 and 1,800 is considered moderately competitive (monopolistic competition), while an HHI greater than 1,800 indicates a market that is not competitive (oligopoly).

honeycfa

Comparing the four-firm concentration ratio and the Herfindahl-Hirschman Index, which is most likely to be associated with a perfectly competitive industry, respectively?

A) 25; 100.

B) 125; 1,000.

C) 90; 2,000.

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The four-firm concentration ratio can range from zero to 100%. The Herfindahl-Hirschman Index has a theoretical range of near zero to 10,000. As the level of competition increases, the value of either of the concentration measures decreases. A perfectly competitive market is a market characterized by relatively low concentration measures.

honeycfa

Which the following four-firm concentration ratios and Herfindahl-Hirschman indexes (HHI) respectively indicates a highly competitive market?

A) 98%; 9,500.

B) 5%; 150.

C) 5%; 9,500.

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For both the four-firm ratio and the HHI, the lower the market concentration measure, the greater the degree of competition.

honeycfa

Consider two markets; one has a Herfindahl-Hirschman Index (HHI) of 50, while the other has a four-firm concentration ratio equal to 2%. Which of the following statements most accurately describes these two markets?

A) Both markets are highly competitive.

B) The market with the HHI equal to 50 has low competition, while the other market is highly competitive.

C) Both of these markets are monopolies.

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An HHI concentration measure of 50 is very low, indicating a high degree of competition. A four firm concentration ratio of 2% indicates a high level of competition. For both the four-firm ratio and the HHI, the higher (lower) the concentration measure, the lower (greater) the degree of competition.

ccloveCFA

Which of the following is the most accurate with regard to the result of banking deregulation that occurred in the U.S. during the 1980s?
A)
The emergence of a great number of small and local banks increased the efficiency of bank operations.
B)
Different types of depository institutions are now more similar in the products and services that they provide.
C)
There is a clearer distinction between the functions of commercial banks on the one hand and thrift institutions on the other.

During the 1980s (and 1990s) many of the restrictions that made commercial banks different from savings banks and thrifts were relaxed, allowing the latter to compete more directly with the former, and allowed other institutions to participate in activities which were formerly only permitted to banks and savings institutions. Another area of deregulation was the repeal of earlier laws that restricted banks from opening branches nationwide. Permitting banks to open branch offices in any state has led to the consolidation of banks, the emergence of a few very large national banks, many mergers and acquisitions, and a resulting increase in the efficiency of bank operations.