- CFA Exams
- CFA Level I Exam
- Topic 2. Economics
- Learning Module 1. The Firm and Market Structures
- Subject 10. Identification of Market Structure
CFA Practice Question
Which of the following is (are) NOT true?
II. The N firm concentration ratio is always smaller than or equal to one.
III. The reciprocal of the Herfindahl index indicates the equivalent number of firms in the industry.
IV. If the Herfindahl index of industry A is larger than that of industry B, A's concentration ratio must be larger than B's.
V. If the concentration ratio of industry A is larger than that of industry B, A's Herfindahl index must be larger than B's.
I. The Herfindahl index is always smaller than or equal to 1.
II. The N firm concentration ratio is always smaller than or equal to one.
III. The reciprocal of the Herfindahl index indicates the equivalent number of firms in the industry.
IV. If the Herfindahl index of industry A is larger than that of industry B, A's concentration ratio must be larger than B's.
V. If the concentration ratio of industry A is larger than that of industry B, A's Herfindahl index must be larger than B's.
Correct Answer: IV and V
There is no direct relationship between the two ratios.
User Contributed Comments 8
User | Comment |
---|---|
Bududeen | very tricky |
JepTang | Yep!! i was choosing between the 2 also. |
jpducros | good question |
frants54 | Sometimes you learn more from the questions than from the study material itself |
robbiecow | Second frants54 on that one! |
chesschh | If you get this right, cosider yourself a genious |
tkluge24 | I think III could be viewed as being incorrect as well...it would need to specify that all firms have equivalent market share?? no?? |
chen511 | III I think it's the original sentence in the material. |