Economics MCQ - Economics Section 1

41 An analyst gathers the following market data for an industry:

Company	Revenue (In million$)
UBL	900
HBL	800
NBP	700
NIB	600
MCB	500
Others	400

The industry’s four-company concentration ratio is closest to:

The top four companies in the industry comprise 77% percent of industry sales:
Concentration Ratio = (900 + 800 + 700 + 600) / (900 + 800 + 700 + 600 + 500 + 400) = 77%

42 An analyst has gathered the following data for an industry comprising of five firms:

Company	Market Share (%)
UBL	35
HBL	30
NBP	25
NIB	5
MCB	5

The industry’s three-firm Herfindahl-Hirschmann Index is closest to:

The three-firm Herfindahl-Hirschmann Index is = 0.35² + 0.30² + 0.25² = 0.275.

43 A firm operates in an industry with very low barriers to entry. The number of players in the market is high and they are competing with each other to provide goods at the lowest prices. None of the players have any pricing power. The best characterization of this firm’s market is:

These characteristics represent perfect competition.

44 A firm operates in an industry where the barriers to entry are comparatively low. Its competitors offer substitute products, but with differentiated features, quality and pricing. The firm has some pricing power, but it is low due to high number of substitutes and high number of competitors. The best characterization of this firm’s market is:

These characteristics represent monopolistic competition.

45 A firm operates in an industry with very few players. The barriers to entry are high and the firm has significant pricing power. The best characterization of this firm’s market is:

These characteristics represent oligopoly.