Chapter 7

Question 1

Market structure

Answer 1

Factors that affect managerial decisions including the number of firms competing in a market, the relative size of firms, technological and cost considerations, demand conditions, and the ease with which firms can enter or exit the industry.

Question 2

Four-firm concentration ratio

Answer 2

The fraction of total industry sales generated by the four largest firms in the industry

Question 3

Herfindahl-Hirschman index (HHI)

Answer 3

HHI = 10,000 Ewi^2. This gives a score for how diverse competitors are within a market. Higher scores suggest the market is dominated by fewer firms and lower scores suggest more participants.