Assume That the Four-Firm Concentration Ratio in an Industry Is

question 240

Multiple Choice

Assume that the four-firm concentration ratio in an industry is 85 percent.Which of the following statements uses one of the five competitive forces to argue that this industry may be more competitive than its concentration ratio suggests?

• A)The high concentration may be due to patents owned by the largest firms but competition will increase when patent rights expire.
• B)If high concentration is the result of large firms owning much of the available supply of a key input, the industry will become more competitive when new sources of the input are discovered by other firms.
• C)Even though concentration is high, large firms in the industry may act competitively by spending large sums on advertising.
• D)The threat of entry into this industry can cause firms in the industry to lower their prices and profits in order to deter entry.

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Definitions:

Guilty

A legal term for a person determined to have committed a crime or a feeling of responsibility for wrongdoing.

Warn

To inform someone of possible dangers or problems, or to advise caution.

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The perceptual phenomenon where the perceived shape of an object remains constant despite changes in the angle of observation or illumination.

Ponzo Illusion

A visual illusion where two horizontal lines of identical length appear different in length because of their background cues, demonstrating depth perception.