As a Measure of Competition in an Industry, Concentration Ratios

question 148

Multiple Choice

As a measure of competition in an industry, concentration ratios have several flaws.One of these flaws is that concentration ratios

• A)assume that all industries have low barriers to entry.
• B)assume that a ratio less than 40 percent means an industry is perfectly competitive.
• C)assume there are only four firms in an industry.
• D)are calculated for the national market, even though competition in some industries is mainly local.

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Definitions:

Regulatory Commission

A government agency or body responsible for enforcing specific laws, regulations, and standards in various sectors, including utilities, telecommunications, and financial markets.

Pure Monopolist

A sole provider of a unique product or service with no close substitutes, giving it the ability to control market prices.

Natural Monopoly

A condition in which a single firm can produce the entire output of a market at a lower cost than what it would be if there were multiple firms.