Question:
Industry structure is often measured by computing the Four Firm Concentration Ratio. Suppose you have an industry with 20 Firms and the CR IS 30%.How would you describe this industry? Suppose the demand for the product rises and pushes the price for the good.What long-run adjustments you expect following this change in demand.
Now consider the industry has 20 Firms but the CR for the industry is 80% instead of 30%. How would describe this industry? What are some reasons why this industry has a high CR while the other industry had a low CR? Is it possible for smaller firms to thrive and profit in such an industry? How? Contrast the effects on market efficiency if the dominating firm use a price leadership model versus a contestable markets models.