Suppose That Firm B in This Table Was Found Guilty

question 162

Multiple Choice

Suppose that Firm B in this table was found guilty of antitrust violations and split into two firms with equal market share. This would cause the Herfindahl index to

• A)rise to 2,500.
• B)fall to 2,500.
• C)fall to 2,450.
• D)rise to 2,450.

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Definitions:

Maximum Willingness to Pay

The highest amount a consumer is willing to spend on a good or service, reflecting the perceived value.

Consumer Surplus

The difference between what consumers are willing to pay for a good or service and what they actually pay.

Rational

Related to decision-making, denotes behavior in accordance with logic or reason, where choices are made to maximize self-interest or outcome.

Inelastic

Characterizing a situation where a change in price leads to a relatively small change in the quantity demanded or supplied.