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Economics in a Global Environment

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Details: Industry structure is often measured by computing the Four-Firm Concentration Ratio. Suppose you have an industry with 20 firms and the CR is 30%. How would you describe this industry? Suppose the demand for the product rises and pushes up the price for the good. What long-run adjustments would you expect following this change in demand? What does your adjustment process imply about the CR for the industry? Now consider that the industry has 20 firms but the CR for the industry is 80% instead of 30%. How would you describe this industry? What are some reasons why this industry has a high CR while the other industry had a low CR? Is it possible for smaller firms to thrive and profit in such an industry? How?

There are two separate parts to this IP: a market with CR =30 and a market with CR =80. This project concerns the measurement and analysis of competition. . Each part requires you to describe the "industry"; interpret "industry" to be "market structure" For each part, select one of the four market (industry) structures and justify your choice. Note that there is insufficient information in this IP to calculate HHI HHI cannot be calculated.

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The four-firm concentration ratio represents the market share, as a percentage, of the four largest firms in the industry. Concentration isn't necessarily inefficient, but it can lead to collusion if regulations are lax or the companies are unethical. Thus regulators often consider this calculation when deciding if a firm is violating antitrust laws. Low CR numbers generally indicate monopolistic competition. Little danger of violating antitrust laws will occur in this case. Higher numbers indicate oligopoly. The exact number where a market becomes an oligopoly is debatable. Most studies indicate that when CRs are above 45 to 60 per cent firms become excessively profitable. Because ...

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