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:

Value Chain

A model that describes the full range of activities required to create a product or service, from conception through the different phases of production to eventual delivery to the consumer.

Mass Services

Services provided to a large number of customers with standardized processes, often seen in the banking and retail sectors.

High Contact Time

Situations where there is extensive interaction or engagement over a period between two parties, such as in education or customer service.

Process Costing Systems

An accounting system used in manufacturing where costs are assigned to processes or departments and then allocated to products.