Concentration ratios

Question

Quizplus · Accepted Answer

Concentration ratios may understate the degree of competition because they ignore imported products. This is because the ratios only consider the market share of domestic firms, and do not take into account potential competition from foreign firms. Option A is incorrect because it states that concentration ratios overstate the degree of competition, which is not the case. Option B is incorrect because it suggests that interindustry competition is ignored, but concentration ratios are used to analyze competition within a specific industry. Option D is also incorrect because concentration ratios provide information on market concentration, but do not necessarily provide detailed insights on price and output behavior of firms.

Concentration Ratios