Subject: Assistance with econ questions
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? Contrast the effects on market efficiency if the dominating firms use a price leadership model versus a contestable markets model.
Industry with 20 firms and the CR = 30%.
<br>Four-firm concentration ratio is the proportion of total output in an industry that's produced by the four largest firms in the industry. It is commonly used to indicate the degree to which an industry is oligopolistic and how market control is held by the four largest firms in the industry. This implies that the four largest firms in the industry produce just 30% of the output, whereas 70% of the output is produced by the remaining 16 firms. This industry is monopolistically competitive, where there are many producers and many consumers in a given market, consumers have ...