question
what are the principal elements of industry structure
answer
seller concentration, vertical relationships, interfirm associations such as joint ventures
question
U.S. antitrust policy is based on the microeconomic principle that....
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the conduct of the firms in an industry depends on its structure
question
Economists use the Herfindahl-Hirschman (HHI) index to...
answer
measure the seller concentration of an industry
question
what would increase vertical integration in an industry, other things being equal?
answer
many firms deciding to purchase their inputs through the market from other firms
question
Determining the boundaries of an industry is necessary for what? and requires what?
answer
is necessary for calculating its Herfindahl index HHI, and is a necessary step in evaluating the legality of planned mergers (combinations) among its firms, and it requires knowledge of the goods and services that are good substitutes for each other
question
Seller concentration in the US industries is
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high in some industries such as tobacco products, broiler production, and beer but not in others
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In what kind of industry would seller concentration be the highest?
answer
one in which there is only one seller like a monopoly.
question
What influences the distribution of welfare in any society?
answer
random forces like chance and luck
question
How has the US law regarding resale price maintenance evolved?
answer
US resale price maintenance law has evolved in an erratic way through both statutory and judicial changes
question
controversies over vertical restraints....
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continue today with the debates over resale price maintenance in the sale of contact lenses
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Economists have found that when business firms make large investments in highly specialized machinery or structures to operate in an industry..
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there are strong pressures for them to increase their degrees of vertical integration (backward integration)
question
Decisions about the best degree of vertical integration within any business firm must what? and are often what?
answer
Must take into account the contractual costs of reliance of market transactions to get work done, must take into account the pricipal-agen costs of reliance on managerial trancsactions to get work done, and are often motivated by an interest in avoiding substnatial costs of negotiating and enforcing contracts
question
What states an argument made by industrial economists about vertical integration
answer
It can be used by a powerful firm to ruin its competitiors by controlling their access to key inputs, it can to the extent that it produces efficiencies impede the entry of new firms into an industry, It would not be used by rational business mnagers to de3stry their unintegratd competitors
question
Most industrial economists believe that vertical integrations is what
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is an obsolete industrial strategy, espically whithin the agricultural sector
question
What are the requirements for the operation of the law of diminishing marginal productivity?
answer
At least one of the inputs (factors) must be fixed, and the state of technology must be fixed
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Other things equal, a small increase in the firm's use of labor reduces the rate of output. This implies what?
answer
It implies that the marginal product of labor under these conditions is negative.
question
Returns to scale describes the relationship between...
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inputs and outputs when there are only variable inputs
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What will be produced if a firm is enjoying increasing returns to scale?
answer
Economies of scale
question
One reasonable objection to orthodox or standard production theory derives from...
answer
the difficulties that we often face in interpreting and measuring Q, the max output rate, the obstacles to making sense of the concept of marginal product of a factor and the inability of business firms to use labor and capital in all possible combinations
question
When does an externality exist?
answer
When harms or benefits are transmitted between people without (outside) of market transactions.
question
Externalities can persist as a result of what?
answer
The high transactions costs that must usually be incurred to eliminate them.
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