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industry's characteristics

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Scenario: Before you write your business plan one must decide between two different industries A or B.
Industry A has 20 firms and a Concentration Ratio (CR) of 30%
â?¢ What is the name for this type of industry?
â?¢ Describe some of this industry's characteristics.
â?¢ If you were in this industry and there was an increased demand for the product that pushed up the price of goods, what long-run adjustments would you expect?
â?¢ What does your anticipated adjustment process imply about the CR for the industry?
Industry B has 20 firms and a Concentration Ratio (CR) of 80%.
â?¢ What is the name for this type of industry?
â?¢ Describe some of this industry's characteristics.
â?¢ What are some reasons why this industry has a high CR while Industry A had a low CR?
â?¢ Is it possible for smaller firms to thrive and profit in Industry B? Why or why not?

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Solution Summary

Rationales are included to assist in deciding between two different industries A or B: Industry A has 20 firms and a Concentration Ratio (CR) of 30%.

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Concentrations ratios from 0-50% are considered low concentration. This industry is monopolistically competitive and is characterized by many consumers and producers in the market. Each producer creates a slightly different product and are motivated to advertise fiercely. If price rises slightly due to higher demand, profits increase and more producers enter the market, until ...

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