The breakfast cereal industry has a four-firm concentration ratio of 80 percent. Is this enough information to classify the industry as an oligopoly? Is a high concentration ratio evidence that an industry is not competitive?
What will be an ideal response?
Most economists classify an industry with a four-firm concentration ratio greater than 40 percent as an oligopoly; therefore, the breakfast cereal industry would be considered an oligopoly. But the concentration ratio is a flawed measure of the extent of competition in the breakfast cereal industry. For example, concentration ratios do not include sales in the United States by foreign firms, so to the extent that foreign firms sell breakfast cereal in the United States, the concentration ratio understates the degree of competition in this industry. Also, since concentration ratios are calculated for the national market, regional or local competition is ignored. Concentration ratios are useful for providing a general idea of the extent of competition in an industry.
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Ryan experiences an increase in his wages. The hours of labor that he supplies to the market would increase if
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Which of the following is not true about government spending on national defense?
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