Order the following markets in terms of their four firm concentration ratio: A d
ID: 1155197 • Letter: O
Question
Order the following markets in terms of their four firm concentration ratio: A duopoly, a monopoly, a perfectly competitive (PC) market with 50 firms, and a perfectly competitive market with 150 firms.
A. Monopoly = Duopoly > PC with 50 firms > PC with 150 firms
PC with 150 firms > PC with 50 firms > Duopoly = Monopoly
Monopoly > Duopoly > PC with 50 firms > PC with 150 firms
Monopoly = Duopoly > PC with 150 firms > PC with 50 firms
A. Monopoly = Duopoly > PC with 50 firms > PC with 150 firms
B.PC with 150 firms > PC with 50 firms > Duopoly = Monopoly
C.Monopoly > Duopoly > PC with 50 firms > PC with 150 firms
D.Monopoly = Duopoly > PC with 150 firms > PC with 50 firms
Explanation / Answer
A. Monopoly = Duopoly > PC with 50 firms > PC with 150 firms
Explanation: The four-firm concentration ratio refers to the percentage of market share held by the largest four firms in the market. A monopoly is a single firm in a market. Therefore, the four-firm concentration ratio in a monopoly is 100%
In a duopoly, there are only two large firms in the market. Therefore, the four-firm concentration ratio in a duopoly is 100%
In a perfectly competitive firm, there are a large number firms and each firm has around the same market share. Also, since each firm has around the same market share, the four-firm concentration ratio in the perfectly competitive market with 50 firms will be higher than the four-firm concentration ratio in the perfectly competitive market with 150 firms.
So, the right answer is : Monopoly = Duopoly > PC with 50 firms > PC with 150 firms
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