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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 Preview

    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 ...

    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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