CEA Market & Industry Analysis 3

Question 1

Which elasticity concept measures the percentage change in demand for Good A resulting from a percentage change in the price of Good B?

Accepted Answer

Cross-price elasticity of demand

Answer

Cross-price elasticity of demand measures how the quantity demanded of one good responds to price changes in another related good.

Question 2

A positive cross-price elasticity between two goods indicates they are:

Accepted Answer

Substitute goods

Answer

When goods are substitutes, a rise in one good's price increases demand for the other, producing a positive cross-price elasticity.

Question 3

Market power is most commonly measured by which indicator?

Accepted Answer

Lerner Index

Answer

The Lerner Index measures market power as (P − MC)/P, ranging from 0 (perfect competition) to 1 (pure monopoly).

Question 4

Regulatory capture occurs when:

Accepted Answer

Government regulators begin serving industry interests rather than the public

Answer

Regulatory capture describes the phenomenon where regulatory agencies advance the commercial interests of the industries they are supposed to regulate.

Question 5

In industry analysis, a 'strategic group' refers to:

Accepted Answer

Firms within an industry using similar competitive strategies

Answer

Strategic groups are clusters of firms within an industry that follow similar strategies and compete more directly with each other than with firms in other groups.

(CEA) Certified Economic Analyst Practice Test

(CEA) Certified Economic Analyst Practice Test

CEA Market & Industry Analysis 3