Industry Fo Four-Firm Concentration Ratio Firm Industry Four-Firm Concentration
ID: 1174399 • Letter: I
Question
Industry Fo Four-Firm Concentration Ratio Firm Industry Four-Firm Concentration Ratio Most economists define an oligopoly if there is a four-firm concentration ratio of what in an industry? | 98% Discount departmert stores 97% Cigarettes o 85% ? 65% 40% 70% Warehouse 94 Beer 90% clubs and supercenters College bookstores 75% Computers | 87% Hobby, toy, and game stores | 72% Aircraft Please reference the table to the left. Which of the following industries are considered oligopolies according to this standard? Radio television and other electronic stores 70% Breakfast cereal | 80% Pharmacies and drugstores Dog and cat food Discount department stores Automobiles Athletic footwear stores 68% Dog and cat | 71% food Pharmacies | 63% and drugstores Automobiles | 68% Complete the statement below An oligopoly consists of many seller(s) providing a few goods in a market where barriers to entry are Select answer identical low a few high one many differentiatedExplanation / Answer
The concentration ratio is defined by the market share of the four largest firms in the market. It is an indicator of the degree of competition and provides signs of the oligopolistic nature of the industry. It varies from 0% to 100%. Comparing extremes, low concentration means perfect competition and high concentration means monopoly exists. From 40% to 70% is the range of oligopoly.
Most economists consider 65% as an appropriate ratio of concentration to define an oligopoly. From the given table Pharmaceutical and drugs have a ratio of 63% which is closest to being an oligopoly and also automobiles.
Oligopoly market consists of a few large sellers selling differentiated but similar goods with differentiated barriers to entry.