Question

1. The concentration ratio for an industry with four firms shows the: a) total market capitalization...

1. The concentration ratio for an industry with four firms shows the:

a) total market capitalization of the four firms.

b) percentage of profits accounted for by the four firms.

c) percentage of sales accounted for by the four firms.

d) total costs of production of the four firms.

e) total quantity of output of the four firms.

2. When the four-firm concentration ratio is less than 40 percent, we can conclude that:

a) the industry is monopolistically competitive.

b) the four dominant firms in the industry enjoy a high degree of market power.

c) the industry is competitive.

d) the industry is a tight oligopoly.

e) the market shares of each firm in the industry are highly unequal

3. Which of the following is true of a zero-sum game?

a) Each player always has a dominant strategy.

b) The value of the game is equal to zero.

c) There are only two players.

d) Each player’s gain comes at the expense of the other.

e) One player’s payoff is independent of the other player’s actions.

4. A Nash equilibrium is defined as the outcome that:

a) is unique and invariant to the strategy chosen by the other.

b) results when both players lose by deviating from the equilibrium play.

c) results in equal payoffs to both players.

d) maximizes the sum of the players’ payoffs.

e) maximizes each player’s payoff against the strategy chosen by the other.

5. Firms do not have the economic incentive to advertise when:

a) there is information asymmetry in the market.

b) there are a small number of firms in the market.

c) there are entry barriers in the market.

d) the goods that are produced are imperfect substitutes.

e) products are standardized.

Homework Answers

Answer #1

1) The correct answer is option C) because the concentration ratio tells us the market share of the firm.

2) The correct answer is option b) because for competitive industry the four firm concentration ratio lies between 0 to 40%.

3) The correct answer is option b) because under zero sum game an individual cannot be made better off without making other worse-off.

4) The correct answer is option b) because the nash equilibrium is the mutual best response and there is no profitable deviation possible.

*We are supposed to do only four MCQ's.

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