Refer to the section "The Prevalence of Oligopoly" and review the formula for Herfindahl-Hirschman Index or HHI.

Assume an industry consists of six firms with the following market shares:

Firm Market Share (%)

A 12

B 24

C 14

D 22

E 20

F 8

Calculate HHI. How would this industry be characterized by the Justice Department guidelines?

and

1. For each of the following situations, decide whether advertising is directly informative about the product or simply an indirect signal of its quality. Explain your reasoning.
2. Football great Peyton Manning drives a Buick in a TV commercial and claims that he prefers it to any other car.
3. McDonald's spends millions of dollars on an advertising campaign that proclaims: "I'm lovin' it."
4. Subway advertises one of its sandwiches by claiming that it contains 6 grams of fat and fewer than 300 calories.
5. Define product differentiation. Your textbook describes three important forms of product differentiation. Describe each form with examples.