The Industry Elasticity of Demand for Gadgets Is −2,while the Elasticity

question 11

Multiple Choice

The industry elasticity of demand for gadgets is −2,while the elasticity of demand for an individual gadget manufacturer's product is −2.Based on the Rothschild approach to measuring market power,we conclude that:

• A) there is little monopoly power in this industry.
• B) there is significant monopoly power in this industry.
• C) the Herfindahl index for this industry is −2.
• D) the Herfindahl index for this industry is 2.

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Definitions:

Perfectly Competitive Market

A theoretical market structure characterized by an infinite number of small firms, identical products, and no barriers to entry or exit.

Vendors Sell

The act of offering goods or services to buyers in exchange for money or other forms of payment.

Long-run Equilibrium

A state in which all factors of production can vary, and economic agents have fully adjusted to any changes, leaving no incentive for further adjustments.

Perfectly Competitive Market

An economic market setup in which there are numerous buyers and sellers dealing in identical products with no obstacles for entering or leaving the market.