Why might a concentration ratio be a poor measure of actual industry competition?
What will be an ideal response?
Concentration ratios measure national competition within a line of products that are substitutes in production. Where there is much international competition, where competition is regional rather than national, where there is competition from products that are substitutes in consumption but not production, and for other reasons listed in the text, competition ratios may be poor measures of competition.
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Assume that the full-employment level of output is $1,000 and the price level associated with full-employment output is 100. Also assume that the economy's current level of output is $1,100 and, at the price level of 100, current aggregate demand is $1,200. If the government wants to move the economy back to the full-employment level of output and the MPC is 0.75, then it should
A. reduce government purchases by $100. B. reduce government purchases by $200. C. reduce government purchases by $50. D. reduce government purchases by $25.
The principle of voluntary exchange is the concept that a voluntary exchange between two people makes both people better off
Indicate whether the statement is true or false
When a monopolistically competitive firm cuts its price to increase its sales, it experiences a loss in revenue due to the
A) income effect. B) output effect. C) price effect. D) substitution effect.
When the CPI increases from one year to the next:
A. the cost of living has decreased. B. deflation has occurred. C. people need to spend more money to buy the same amount of goods as the previous year. D. All of these statements are true.