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Highly Concentrated Industries and Oligopolies

This is the answer I received for posting 30071 below. I need to answer a second part to this respond.
An industry with 20 firms but the CR = 80% is called "high concentration", for a concentration ratio of 80 to 100 percent is viewed as high concentration. Government regulators are usually most concerned with industries falling into this category. It is a good indication of oligopoly and that these four firms have significant market control.

Answers Needed to these:

*What are some reasons why this industry has a high CR while the other industry has a low CR?

*IS it possible for smaller firm to thrive and profit in such an industry? How?

*Contrast the effects efficiency if the dominating firms use a price leadership model versus a contestable markets model.

Solution Preview

For a concentration ratio of 80 to 100 percent is viewed as high concentration. Government regulators are usually most concerned with industries falling into this category. It is a good indication of oligopoly and that these four firms have significant market control.

*What are some reasons why this industry has a high CR while the other industry has a low CR?

In industrialized countries, high CR industries are found in many sectors of the economy, such as cars, consumer goods, and steel production.
For example, the aircraft industry has a CR close to 80%. There are now only a small number of manufacturers of civil passenger aircraft. This is due to economy return to scale: the initial investment of an aircraft manufacturer or an air company is extremely high, usually involving billions of dollars. Then it is practically impossible for small firms to enter this market, although there is obviously high profit in the industry. This initial investment works like a capital barrier to entrants, and caused high CR.
Another important reason arises in a heavily regulated market ...

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