The fact that a firm's R&D spending as a percentage of sales varies across industries, such as Bristol-Myers Squibb at 17.0 percent and Kellogg at 1.5 percent, is an example of differences in industry:
Explanation
This question uses data from Table 7-6 to test the classification of R&D spending within the structure-conduct-performance paradigm. R&D is a behavioral choice by firms, and thus is an element of 'conduct,' as outlined on pages 246 and 250.
Other questions
An industry is composed of 8 firms. Five firms have sales of 20 million dollars each, and three firms have sales of 10 million dollars each. What is the four-firm concentration ratio for this industry?
According to the Rothschild index, what does a value of 1 indicate about the price sensitivity of an individual firm's demand relative to the entire market?
What is the Lerner index for a firm that charges a price of 500 dollars and has a marginal cost of 150 dollars?
Which of the following is NOT a primary reason firms engage in horizontal integration, according to the text?
An industry consists of three firms with sales of 300,000, 600,000, and 900,000 dollars. What is the Herfindahl-Hirschman Index (HHI) for this industry?
What is the feedback critique of the structure-conduct-performance paradigm?
According to the Horizontal Merger Guidelines, a market with a post-merger HHI of 1,500 would be considered:
The industry elasticity of demand for textiles is -1.5, while the elasticity for a representative firm is -4.7. What is the Rothschild index for the textiles industry?
What is the markup factor for an industry with a Lerner index of 0.58?
What does a Dansby-Willig performance index of zero signify?
Which of the following is an example of a conglomerate merger?
One limitation of the concentration measures presented in Table 7-2 is that they are based on a definition of the product market that excludes foreign imports. How does this tend to affect the calculated level of concentration?
Which of the following best describes a market characterized by monopolistic competition?
In the snack food industry, the C4 ratio is 64 percent and the HHI is 2717. In the motor vehicle industry, the C4 is 81 percent and the HHI is 2324. Which statement best explains this discrepancy?
What is the primary economic rationale for the existence of patents?
A merger is proposed in an industry where the pre-merger HHI is 1900. The merger would increase the HHI by 110 points. According to the Horizontal Merger Guidelines, what is the likely response from the FTC or DOJ?
Which industry in Table 7-5 has the highest markup factor, and what does this imply about its pricing?
The NAICS is a standardized classification system for which of the following?
An industry is composed of two firms. Firm A has sales of 40 million dollars, and Firm B has sales of 60 million dollars. What is the Herfindahl-Hirschman Index (HHI) for this industry?
What is the primary distinction between the causal view and the feedback critique of the structure-conduct-performance paradigm?
A market is characterized by many small firms, each producing a homogeneous product, with perfect information and no transaction costs. This best describes which market structure?
What is the four-firm concentration ratio for the distilleries industry, based on Table 7-2?
If the Lerner index for an industry is 0.67, what is the corresponding markup factor?
Which of the following factors is NOT listed as a component of market structure in the chapter's definition?
If a horizontal merger increases the HHI by 800 in an industry that was already highly concentrated, the Justice Department would most likely:
The Dansby-Willig performance index for the food industry is 0.51, and for the textile industry is 0.38. What can be inferred from this?
Which of the following is an example of vertical integration?
An industry has a four-firm concentration ratio of 100 percent and a Herfindahl-Hirschman index of 5,573. A representative firm has a Lerner index of 0.43 and a Rothschild index of 0.76. This industry is best characterized as:
What is the Herfindahl-Hirschman Index for the electronic computers industry according to Table 7-2?
An industry is composed of 10 firms, and the top four firms have sales of 175,000, 150,000, 125,000, and 100,000 dollars, respectively. Total industry sales are 1 million dollars. What is the four-firm concentration ratio?
A firm has 1 million dollars in sales, a Lerner index of 0.65, and a marginal cost of 35 dollars. What price does this firm charge its customers?
Why does the evolution of the computer industry, as described in Inside Business 7-3, illustrate the importance of understanding all market structures?
The market elasticity of demand for retail gasoline is -0.9, and the Rothschild index is 0.6. What is the price elasticity of demand for a representative gasoline retailer’s product?
Which of the following is a key component of the 'conduct' of firms in an industry?
If a merger between two firms with market shares of 20 percent and 10 percent occurs, by how much will the HHI increase?
Which of the following U.S. industries listed in Table 7-2 has the lowest four-firm concentration ratio?
A firm charges a price 1.32 times its marginal cost. What is its Lerner Index?
An industry has a four-firm concentration ratio of 0.0001 percent and a Rothschild index of 0.00023. This industry is best characterized as:
Which of the following is NOT listed as a structural variable that affects managerial decisions?
What is the Herfindahl-Hirschman Index for the ready-mix concrete industry, based on Table 7-2?
Which of the following is an example of the 'feedback critique' in action?
The Rothschild index for the food industry is 0.26. What does this value imply?
A firm in the tobacco industry has a markup factor of 4.17. What is its Lerner Index?
The North American Industry Classification System (NAICS) code for 'Motion Picture Theaters (except Drive-Ins)' in the U.S. is 512131. What does the digit '2' in the third position signify?
Suppose an industry has 5 firms, each with 20 percent market share. What is the industry's Herfindahl-Hirschman Index (HHI)?
Which of the following would NOT be considered a barrier to entry?
An industry where a few large firms tend to dominate the market, such as the airline or automobile industries, is best described as:
If two firms in an industry merge, what is the general rule for the increase in the Herfindahl-Hirschman index (HHI)?
Why might using national data to calculate concentration ratios be misleading for an industry like ready-mix concrete?