Concentration Ratios May Be Inaccurate Indicators of the Degree of Monopoly

question 241

Multiple Choice

Concentration ratios may be inaccurate indicators of the degree of monopoly power in an industry because

• A) they include interindustry competition.
• B) foreign competition is not considered.
• C) they are only calculated for local and regional markets.
• D) they do not distinguish between normal and economic profit.

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Definitions:

Full Cost

The total cost of producing a product or service, including all direct, indirect, fixed, and variable costs.

Price-Fixing Contracts

Agreements between competitors to set prices at a certain level, which is illegal in many jurisdictions because it undermines free market competition.

Competition

The rivalry among businesses to attract customers and achieve market dominance.

Quoting Prices

The action of providing a prospective customer with a price at which a seller agrees to sell goods or services.