Question

No explanation , just answers.

QUESTION 1

1. Deep discounting and limit pricing are utilized by firms in an effort to do what?

   		increase demand elasticity
   		Artificially change equilibrium price and quantity
   		Gain entrance into a market with high barriers to entry
   		avoid competition
   		Gain entrance into a market with high brand loyalty and/or brand identification

QUESTION 2

1. Which of the following is true of an industry’s Herfindahl-Hirschmann Index (HHI)?

   		A low score indicates a monopolistic market
   		It is used to determine the amount of collusion in an industry
   		It measures the amount of government involvement in an industry
   		A high score indicates an oligopolistic market structure
   		Higher scores indicate increasing power of labor over wages QUESTION 3 Price support programs are most likely to exist in which of the following situations? where there is information asymmetry where sellers have too much influence over price where antitrust enforcement is lax where free riders exist where buyer power is too great QUESTION 4 Patents may be granted in order to seek to avoid which market problem? price fixing free riders moral hazard collusion natural monopolies QUESTION 5 Which of the following is most likely true of your business strategy if you decide to open a small local theater? You will need to get the top movies to compete directly with the theater chains You will not be able to succeed due to barriers to entry You will likely look to run independent films or otherwise avoid directly competing with theater chains Barriers to entry will be your best chance of achieving economic success Antitrust laws will probably prevent you from doing so in order to preserve the market status of your competitors

Answer 1

Question—1

Gain entrance into a market with high barriers to entry

The deep discounting and limit pricing are the strategies of the firm to prevent new firm to entry into the market. Here the firm sets a price below the average variable cost of its competitors.

Question—2

A high score indicates an oligopolistic market structures

The HHI indicates market concentration. It is measured by using the square of the market share of each firm in the market.

Question—3

Where buyer power is too great

Question—4

Natural monopolies

The natural monopoly existed in the market because of the higher start-up cost.

Question—5

You will likely look to run independent films or otherwise avoid directly competing with theatre chains