Assume That Expectations of P and a Are Correct

question 10

Multiple Choice

Assume that expectations of P and A are correct. Now suppose that there is a 4% increase in A. Given this
Information, which of the following will occur?

• A) The PS relation will shift up by 4%.
• B) The PS relation will shift up by less than 4%.
• C) The WS relation will shift down by 4%.
• D) The PS relation will shift down by 4%.
• E) The WS relation will shift up by less than 4%.

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Definitions:

Oligopoly

A market structure characterized by a small number of firms controlling a large share of the market, leading to limited competition.

Concentration Ratios

Statistical measures used to evaluate the degree of competition within markets by analyzing the market share of the largest firms.

Concentrated Industry

An industry characterized by a small number of large firms that have a significant market share, leading to reduced competition.

Herfindahl-Hirschman Index

A measure used to assess the level of competition within an industry, calculated by squaring the market share of each firm competing in the market and then summing the resulting numbers.