Asked by Jensen Watterson on Jul 03, 2024
Verified
If an industry evolves from oligopoly to monopolistic competition, we would expect
A) the four-firm concentration ratio to increase.
B) the four-firm concentration ratio to decrease.
C) the four-firm concentration ratio to remain the same.
D) barriers to entry to strengthen.
Four-Firm Concentration Ratio
A measure of market concentration, indicating the total market share held by the four largest firms within a specific industry.
Oligopoly
A market structure characterized by a small number of firms controlling a large market share, leading to limited competition and potentially higher prices for consumers.
Monopolistic Competition
A competitive landscape where numerous companies offer products that are alike but not the same, providing an opportunity for limited market control and the distinction of products.
- Evaluate the impact of market transitions (e.g., from oligopoly to monopolistic competition) on industry characteristics.
Verified Answer
CE
Carlos ErnestoJul 05, 2024
Final Answer :
B
Explanation :
When an industry evolves from oligopoly to monopolistic competition, it means that more firms are entering the market, which dilutes the market share of the largest firms. This leads to a decrease in the four-firm concentration ratio, indicating a more competitive market environment with less dominance by the top firms.
Learning Objectives
- Evaluate the impact of market transitions (e.g., from oligopoly to monopolistic competition) on industry characteristics.