Suppose We Observe the Following Two Simultaneous Events in the Market

question 32

Multiple Choice

Suppose we observe the following two simultaneous events in the market for fish. First, there is a decrease in the demand for fish due to changes in consumer tastes. And second, there is a reduction in seafood supply due to oil spills in the oceans. We know with certainty that these two simultaneous events will cause which of the following?

• A) no change in the equilibrium quantity and a reduction in the equilibrium price
• B) an increase in the equilibrium quantity and in the equilibrium price
• C) a decrease in the equilibrium quantity and an indeterminate change in the equilibrium price
• D) a decrease in the equilibrium quantity and an increase in the equilibrium price

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Definitions:

Herfindahl Index

The Herfindahl Index is a measure of market concentration used to determine the intensity of competition within an industry, calculated by summing the squares of the market shares of all firms within the market.

Import Competition

The pressure on domestic companies from foreign producers offering goods or services in the same market.

Herfindahl Index

A measure of market concentration that squares and then sums the market share percentages of all firms within the industry.

Market Shares

The proportion of a market controlled by a particular company, product, or service in relation to total sales in the market.