If an industry currently dominated by three large producers whose revenues represent 30, 30, and 30 of the market's total revenues, with the remaining two firms each representing 5, then one of the large firms merged with one of the small ones, what would be the new four firm concentration ratio and the new Herfindahl-Hirschman Index for this industry?
a. 100; 3,050
b. 100; 2,750
c. 95; 3,050
d. 95 2,750
Question 2
Assume that 50 percent of the population consisting of 2,000 low-risk people and 1,000 high-risk people choose a comprehensive health insurance plan having a break even premium of 800 . The remaining 50 percent, also consisting of 2,000 low-risk people and 1,000 high-risk people, choose a Health Maintenance Organization plan having a break even premium of 400 . If high-risk people submit claims worth 2,000 under the comprehensive plan and 1,000 under the HMO plan, which of the following situations will occur?
a. High-risk people will shift to the comprehensive plan resulting in an increase in its premium rate.
b. High-risk people will shift to the HMO plan resulting into a fall in its premium rate.
c. Low-risk people will shift to the comprehensive plan resulting in a substantial decrease in its premium rate.
d. Low-risk people in both groups will stick to their respective plans and minimize their losses.
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