1) Which statement is true?

a) Collusion most likely in industries with high concentration ratios.

b) Collusion most likely in industries with low concentration ratios.

c) There is no relationship between the likelihood of collusion and the size of the concentration ratio.

2) A Herfindahl-Hirschman Index of 10,000 would mean there is (are) how many firm(s) in the industry?

a) 1.

b) 10.

c) 1,000.

d) 10,000.

3) Which statement is false?

a) Growing automobile imports have made that industry?s concentration ratio is less relevant.

b) The Japanese automobiles have reduced the concentration ratio in that industry.

c) Most cars made in the United States are made by General Motors, Ford, and Chrysler.

1) a) Collusion most likely in industries with a high concentration ratio.

A high concentration ratio means that a few firms control a large percentage of the market share in an industry. A low ratio conversely means that many firms compete. It is much easier to have collusion when only a few firms are involved as opposed to many.

2) A Herfindahl-Hirschman Index of 10,000 would mean there are firms in the industry

d) 10,000. The HH index sums the squares of the market shares for each firm in the industry. 10,000 is its maximum value.

3) Statement C is false.

This is true since the foreign carmakers represent new entrants to the US car industry. That reduces the threat of Oligopoly and makes concentration ratios less relevant.

This is true since the Japanese carmaker's entry into the US market reduced all firms market share and lowered the concentration ratio.

This is false. According to 2018 sales data, General Motors, Ford, and Chrysler account for 44% of the cars sold in the US.