Reading 16: Organizing Production-LOS f 习题精选 2011, describes, following, interpret, measures

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Session 4: Economics: Microeconomic Analysis
Reading 16: Organizing Production

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) Monopoly; 10,000.

C) Perfect competition; 1,800.

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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).

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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) 125; 1,000.

B) 90; 2,000.

C) 25; 100.

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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.

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

A) 98%; 9,500.

B) 5%; 9,500.

C) 5%; 150.

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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.

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

B) Both markets are 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.

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