Exploring Economics
8th Edition
ISBN: 9781544336329
Author: Robert L. Sexton
Publisher: SAGE Publications, Inc
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Question
Chapter 15, Problem 9P
To determine
(a)
To compute:
The Herfindahl-Hirschman Index (HHI) for the given situation.
To determine
(b)
To compute:
The Herfindahl-Hirschman Index (HHI) for the given situation.
To determine
(c)
To compute:
The Herfindahl-Hirschman Index (HHI) for the given situation.
To determine
(d)
To compute:
The Herfindahl-Hirschman Index (HHI) for the given situation.
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There are two groups of firms below.
Group 1: firms in the retail sector (e.g. Amazon; Wal-Mart; Target; Kohl's; Sears; Macy's)
Group 2: firms in the wireless services industry (e.g. Verizon; AT & T; Sprint/T-Mobile) (this about telecommunication services, not about the sale of phones)
For each group determine and explain if the group is monopolistic competitive or an oligopoly. You need to specific for both in which market structure the firms operate)
Then choose one of the firms from one group. Using a Porter's analysis what are the threat to profitability?
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.A measure called Herfindahl-Hirschman Index is used to measure the degree of competition in an industry. The HHI is the square of each firm’s market share summed over the firms in the industry. (Where a market share is the percentage of sales in the market accounted for by that firm). For example, if an industry contains only three firms and their market shares are 60%, 25%, and 15% then the HHI (by squaring each firm’s share and summing them) is 4450. Some economists classify the market structures according to HHI scores. An HHI below 1,500 indicates a strongly competitive market, between 1,500 and 2,500 indicates a somewhat competitive market, and over 2,500 indicates an oligopoly.
Given the information in the table, calculate the HHI in this industry. If yahoo and Bing were to merge, what would the HHI be?
Google 67%
Yahoo 18
Bing 11
Ask 3
AOL 1
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- Discuss why a producer in an oligopolist market ("few" competitors) will pay closer attention to their competitors than a producer in a highly competitive market ("many" competitors).arrow_forwardWhat is the prisoner's dilemma? the game that demonstrates the basic problem facing noncolluding oligopolists a theory on how the monopolist charges prices above the market equilibrium U the competition that can occur among firms in monopolistic competition a theory about why firms break the law by colluding OOOarrow_forwardPlease consider firms in the following types of markets: Monopolistic Competition Oligopoly Pure Competition Pure Monopoly Check All That Apply The following questions will ask you to check all of the market types that has each characteristic. There may be only one market type or there may be more than one market type for each characteristic. Price is equal to marginal revenue Monopolistic Competition Oligopoly Pure Monopoly Pure Competition Has high barriers to entry Monopolistic Competition Pure Competition Pure Monopoly Oligopoly Charges the lowest price Pure Monopoly Pure Competition Monopolistic Competition Oligopoly Produces the lowest quantity Monopolistic Competition Pure Monopoly Pure Competition Oligopoly Achieves allocative efficiency in the long run equilibrium Monopolistic Competition Pure Competition Oligopoly Pure Monopoly O O O Oarrow_forward
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