Industries X and Y Both Have Four-Firm Concentration Ratios of 53

question 187

Multiple Choice

Industries X and Y both have four-firm concentration ratios of 53 percent, but the Herfindahl index for X is 1,965, while that for Y is 2,019. These data suggest

• A)greater market power in X than in Y.
• B)greater market power in Y than in X.
• C)that X is more technologically progressive than Y.
• D)that price competition is stronger in Y than in X.

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Definitions:

SML

The Security Market Line, a graphical representation of the Capital Asset Pricing Model (CAPM) that displays the expected return of an investment as a function of its systemic risk.

Required Rate Of Return

The minimum percentage return an investor expects to receive from an investment, taking into account its risk.

Portfolio

A collection of investments held by an individual or institution, including stocks, bonds, commodities, and more, aimed at diversifying risk.

Required Return

The minimum expected return on an investment necessary for it to be considered a viable option, taking into account its risk level.