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:

Discount on Bonds Payable

The difference between the face value of a bond and its selling price, when sold for less than its face value.

Amortization

The process of spreading out a loan or intangible asset cost over a specific period of time for accounting and taxation purposes.

Generally Accepted Accounting Principles

A collection of commonly-followed accounting rules and standards for financial reporting.