The Average PCM (Percentage Contribution Margin)in a Cournot Equilibrium Is

question 1

Multiple Choice

The average PCM (percentage contribution margin) in a Cournot equilibrium is given by the formula PCM=H/η,where H is the Herfindahl index and η is the price elasticity of market demand.Given this equation,which of the following statements is true?

• A)The more concentrated the industry,the smaller the PCMs in equilibrium
• B)The industry concentration only raises the PCMs in equilibrium
• C)The industry concentration has no bearing on PCM size in equilibrium
• D)The less concentrated the industry,the larger the PCMs in equilibrium
• E)The less concentrated the industry,the smaller the PCMs in equilibrium

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Definitions:

Book Value Per Share

A financial measure that indicates the per share value of a company based on its equity available to shareholders.

Fixed Assets

Long-term tangible pieces of property that a firm owns and uses in its operations to generate income.