If an Industry Has a Herfindahl Index of 3,000, the Contestable

question 75

Multiple Choice

If an industry has a Herfindahl index of 3,000, the contestable market model probably would predict that the industry would be more likely to have a:

• A) monopolistic price.
• B) competitive price.
• C) monopolistic price if there are no barriers to entry.
• D) competitive price if there are no barriers to entry.

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Definitions:

Economic Profits

The surplus left after deducting both explicit and implicit costs from total revenues.

Savings Account

A deposit account held at a bank or other financial institution that provides principal security and a modest interest rate.

Interest Rate

The cost of borrowing money or the return on investment expressed as a percentage, typically on an annual basis.

Implicit Costs

Non-monetary opportunity costs, such as time or foregone alternatives, not directly accounted for in financial transactions.