question archive One measure of the extent of competition in an industry is the concentration ratio
One measure of the extent of competition in an industry is the concentration ratio
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One measure of the extent of competition in an industry is the concentration ratio. What level of concentration indicates that an industry is an oligopoly?
The four-firm concentration ratio:
a. is flawed in that it does not include sales in the U.S. by foreign firms.
b. is accurate because it is based on national and global competition.
c. is flawed in that it includes competition between industries.
d. is accurate because it is based on estimates from the U.S. Census Bureau.
e. Is flawed in that it is calculated for local markets even though competition in some industries is national.
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Most economists believe that if the four-firm concentration ratio is above 90% there is a presence of an oligopoly.
The answer is B. The four-firm ratio is based on all possible competitors in the market that it is being calculated in. So if a foreign producer sells its product here the market share is part of the four-firm ratio.
