Refer to the figure below:
(a) Use the estimated elasticities to calculate the Rothschild index for each industry.
Instruction: Round your answers to 3 decimal places.
Industry
Own Price Elasticity of Market Demand
Own Price Elasticity of Demand for Representative Firm's Product
Rothschild index
Agriculture
-1.8
-96.2
[removed]
Construction
-1.0
-5.2
[removed]
Durable manufacturing
-1.4
-3.5
[removed]
Nondurable manufacturing
-1.3
-3.4
[removed]
Transportation
-1.0
-1.9
[removed]
Communication and utilities
-1.2
-1.8
[removed]
Wholesale trade
-1.5
-1.6
[removed]
Retail trade
-1.2
-1.8
[removed]
Finance
-0.1
-5.5
[removed]
Services
-1.2
-26.4
[removed]
(b) Based on these calculations, which industry most closely resembles perfect competition?
[removed]
Transportation.
[removed]
Wholesale trade.
[removed]
Finance.
[removed]
Retail trade.
(c) Which industry most closely resembles monopoly?
[removed]
Wholesale trade.
[removed]
Retail trade.
[removed]
Finance.
[removed]
Transportation.
Note:TheRothschild index is given by,
R = ET/EF
where ET is the elasticity of demand for the total market and EF is the elasticity of demand for the individual firm’s product.
For perfect competitionRothschild index is 0 and 1 for monopoly so its value lies in between 0 to 1.