1.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 of these markets are monopolies.

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

C)   Both markets are highly competitive.

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

2.For which the following four-firm concentration ratios and Herfindahl-Hirschman indexes (HHI) indicates a highly competitive market?

A)                                        5% 150

B)                                        98%      9,500

C)                                        98%      150

D)                                        5% 9,500

3.Which of the following concentration ratios are most likely to be associated with a perfectly competitive industry?

A)                                        125 1,000

B)                                        85  25

C)                                        90  2,000

D)                                        25  100

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

A)                                        Perfect competition      1,800

B)                                        Monopolistic competition     100

C)                                        Oligopoly      1,500

D)                                        Monopoly      10,000

答案和详解如下：

1.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 of these markets are monopolies.

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

C)   Both markets are highly competitive.

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

Click for Answer and Explanation C)

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.

2.For which the following four-firm concentration ratios and Herfindahl-Hirschman indexes (HHI) indicates a highly competitive market?

Four-Firm Ratio

HHI

A)                                        5% 150

B)                                        98%      9,500

C)                                        98%      150

D)                                        5% 9,500

Click for Answer and Explanation A)

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

3.Which of the following concentration ratios are most likely to be associated with a perfectly competitive industry?

Four-firm concentration ratio

Herfindahl-Hirschman Index

A)                                        125 1,000

B)                                        85  25

C)                                        90  2,000

D)                                        25  100

Click for Answer and Explanation D)

The four-firm concentration ratio can range from zero to 100 percent. 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.

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

Market type

Herfindahl-Hirschman Index

A)                                        Perfect competition      1,800

B)                                        Monopolistic competition     100

C)                                        Oligopoly      1,500

D)                                        Monopoly      10,000

Click for Answer and Explanation D)

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).