The four-firm concentration ratio in the breakfast cereal industry is 80 percent
How does the five competitive forces model provide better insight into the degree of competition in the breakfast cereal industry than just observing the concentration ratio?
The concentration ratio only measures the market share of the largest domestic firms in an industry; it does not describe the degree of competition among the existing firms (one of the five forces), which may come in the form of advertising, service, price, etc. The concentration ratio does not assess the threat firms in the breakfast cereal industry face from potential entrants (another of the five forces) into their market. Existing firms may keep their prices low in order to discourage new firms from entering. The concentration ratio cannot be used to evaluate any of the other three competitive forces—competition from substitute goods (for example, frozen breakfast foods), and the bargaining powers of buyers and suppliers.
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After a speculative attack has been successful, and a country is forced to devalue its currency, it is common to see many local business firms driven to bankruptcy. This most commonly occurs because _____
a. nobody ever wants to invest in a country that just suffered a devaluation b. many local firms took foreign loans (denominated in, say, dollars), and they cannot repay them at the new exchange rate c. the WTO forces troubled firms to show profits or make way for new, more efficient firms d. local firms cannot compete with their foreign competitors at the new prices after the devaluation e. many local firms do not know how to deal with the complicated financial operations involved in a speculative attack
For a competitive market,
a. a seller can always increase her profit by raising the price of her product. b. if a seller charges more than the going price, buyers will go elsewhere to make their purchases. c. a seller often charges less than the going price to increase sales and profit. d. a single buyer can influence the price of the product but only when purchasing from several sellers in a short period of time.
People in an open economy who wish to invest can either:
A. invest at home or abroad. B. buy stocks or bonds. C. invest in private companies or public companies. D. buy financial assets or durable goods.
If ________, a firm would operate in the short run and expand in the long run.
A. AVC > AFC B. ATC > AVC C. TR > TC D. TC > TR