through 5 are based on the following scenario.
Huishan Dairy has the biggest mark-up of all the Chinese dairy oligopolies when it comes to "Dairy Oligopolies." However, activist hedge fund Muddy Waters published a report in late 2016 claiming that the firm was a "data scam."
1. Which of the following claims about market power estimate is NOT correct?
A. If the feed is exported from a US firm rather than utilizing the company's own pasture, the company's cost should be greater than what shows on the financial statement.
B. If Huishan underreported the feed cost, the Lerner index should be lower than the estimate based on the financial statement.
C. If Huishan overstated its market share, the Lerner index should be lower than the estimate based on the financial statement.
D. According to Muddy Water's research, the company's raw milk price of RMB4144/ton is inflated since the industry average is between RMB4005 and RMB4040/ton. If this is the case, the company's mark-up should be larger.
2. Which of the following statements about Huishan Dairy's dishonest actions is TRUE?
A. Data fraud is caused by Huishan Dairy's moral hazard, which is caused by a lack of public oversight.
B. Data fraud is caused by Muddy Waters' unfavorable selection as a result of asymmetric knowledge.
C. If investors can examine the historical performances of other dairy firms, the dairy industry's collective image will be harmed.
D. If Huishan Dairy declares bankruptcy, the dairy industry's collective image may be restored.
3. What is the most probable short-term outcome of the Chinese dairy industry if Huishan declares bankruptcy and exits the market?
A. Following Huishan's departure, consumer surplus will rise.
B. Following Huishan's departure, social welfare will improve.
C. Following Huishan's leave, residual demand for existing enterprises will grow.
D. Following Huis-departure, han's overall industrial production will grow.
4. The government attempts to subsidize the dairy business. Subsidies, on the other hand, have a negative influence on the Lerner index of the dairy market, according to Chen and YU (2019). Which of the following assertions is the most probable cause?
A. Dairy companies may produce at a reduced cost and drop prices thanks to government subsidies, which makes the market more competitive.
B. Dairy enterprises may increase their production sizes and market dominance by receiving government subsidies.
C. Dairy companies may charge a higher price to their consumers and acquire greater market power if they get government subsidies.
D. Dairy enterprises merge and acquire other rivals as a result of government subsidies.
5. Which of the following statements is TRUE if government subsidies are provided to state-owned dairy companies?
A.Private enterprises' best answer is to enhance their production capacity, resulting in an increase in overall industry output.
B. The best response of private enterprises is to cut production, resulting in a reduction in total industry output.
C. Private enterprises' optimal reaction is to cut their production capacity, resulting in an increase in overall industry output.
D. State-owned enterprises obtain market dominance at a lesser cost than private enterprises.
