CEA Market & Industry Analysis 2

Question 1

Which framework analyzes industry attractiveness using supplier power, buyer power, competitive rivalry, threat of substitutes, and threat of new entrants?

Accepted Answer

Porter's Five Forces

Answer

Porter's Five Forces is a structural framework used to evaluate industry attractiveness and competitive intensity.

Question 2

In a perfectly competitive market, the long-run equilibrium price equals:

Accepted Answer

Average total cost at its minimum

Answer

In long-run perfectly competitive equilibrium, firms earn zero economic profit, so price equals minimum average total cost.

Question 3

A market where two firms dominate and each must consider the other's pricing decisions is best described as:

Accepted Answer

Duopoly

Answer

A duopoly is a specific form of oligopoly where exactly two firms control the market and exhibit strategic interdependence.

Question 4

The Herfindahl-Hirschman Index (HHI) is used primarily to measure:

Accepted Answer

Market concentration

Answer

HHI sums the squares of each firm's market share, providing a measure of market concentration used by antitrust regulators.

Question 5

Which market structure allows firms to earn positive long-run economic profits due to product differentiation?

Accepted Answer

Pure monopoly

Answer

A pure monopoly can sustain long-run economic profits because barriers to entry prevent competitors from eliminating the profit.

(CEA) Certified Economic Analyst Practice Test

(CEA) Certified Economic Analyst Practice Test

CEA Market & Industry Analysis 2