Question

Personal Computer Industry Market Shares

Assume the following correctly shows the market shares of the five firms in the market:

Firm	Market Share
----------	---------------------
Dell	50%
HP	30%
Gateway	9%
Toshiba	6%
Apple	5%
	-------
	100%

Refer to Figure 3-5, above. What is the market concentration index and what type of market structure is this industry?

	The market concentration ratio is 80 and the market type is perfect competition.
	The market concentration ratio is 89 and the market type is monopolistic competition.
	The market concentration ratio is 95 and the market type is oligopoly.
	The market concentration ratio is 2,500 and the market type is monopolistic competition.
	The market concentration ratio is 80 and the market type is oligopoly.

The following is true for an oligopoly

	There are many sellers and many buyers.
	There are few firms producing one type of product.
	There is one firm producing one product.
	There are few firms producing many types of products.
	There are many firms producing type one product.

Which of the following is true of the cost of production under the rule of "ceteris paribus?"

I.a firm produces goods by combining land, labor, natural resources and entrepreneurship.
II. In the short run at least one factor of production is fixed.
III. When one factor of production is fixed, the firm will experience marginal diminishing returns.
IV. With good management, all costs of production can be controlled and the firm will always experience long run profits.

	IV only
	I only
	II and III
	II and IV
	I, II and IV
	I, II and III

Answer 1

Correct option is The market concentration ratio is 80 and the market type is oligopoly.

Since there are two big firms Dell and HP whose market shares are 50% and 30% respectively. There concerntration is index is (50+30) = 80 And because there are only few sellers, it is oligopoly market structure.

Correct option is There are few firms producing one type of product.

In oligopoly market structure there are few firms selling a differentiated or identical products.

Corret option for last question is I, II and III

I.a firm produces goods by combining land, labor, natural resources and entrepreneurship.

II. In the short run at least one factor of production is fixed.
III. When one factor of production is fixed, the firm will experience marginal diminishing returns.

These are all true cost of production under the rule of ceteris paribus