Questions on ECO 6

prateek.jain1284
Good Student
Posts: 17
Joined: Sat Jun 09, 2012 10:47 am

Questions on ECO 6

Postby prateek.jain1284 » Sat Oct 20, 2012 4:29 pm

1. In an industry, four firm concentration ratio is 35% and HHI index is 1150, then which of the following is correct?
Choose one answer.
a. Market is competitive as per four firm concentration ratio, moderately competitive as per HHI
b. Market is not competitive as per four firm concentration ratio, competitive as per HHI
c. Market is competitive as per four firm concentration ratio, Oligopolistic as per HHI

2. Decrease in aggregate demand will ____ real GDP and ____ price level
Choose one answer.
a. Decrease, increase
b. Decrease, decrease
c. Increase, decrease

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pankaj
Finance Junkie
Posts: 61
Joined: Fri Aug 03, 2012 11:24 am

Re: Questions on ECO 6

Postby pankaj » Sun Oct 21, 2012 3:03 pm

Ans 1) Market is competitive as per four firm concentration ratio, moderately competitive as per HHI.
Four firm concentration ratio is used to find the %age of market sales accounted for by the four largest firms in an industry. It is simply used to measure the market power and structure. In the question it is given that the four firm concentration ratio is 35%, that is four largest firm account for 35% of total market share, which shows market is competitive.

A market with a result of less than 1,000 is consider to be a competitive marketplace; a result of 1,000-1,800 to be a moderately concentrated marketplace; and a result of 1,800 or greater to be a highly concentrated marketplace. As a general rule, mergers that increase the HHI by more than 100 points in concentrated markets raise antitrust concerns.

Ans 2) Decrease in aggregate demand will reduce the quantity of output demanded, which in turn reduces real GDP and price level.

prateek.jain1284
Good Student
Posts: 17
Joined: Sat Jun 09, 2012 10:47 am

Re: Questions on ECO 6

Postby prateek.jain1284 » Mon Oct 22, 2012 1:04 pm

Thnx


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