A way to measure the degree of concentration in oligopoly is to use:
A) an elasticity ratio.
B) a demand ratio.
C) a ratio that reports the percentage of output accounted for by the largest firms in the industry.
D) the ratio of MC to ATC.

Question

Quizplus · Accepted Answer

A ratio that reports the percentage of output accounted for by the largest firms in the industry, also known as the concentration ratio, is the best way to measure the degree of concentration in oligopoly. This ratio calculates the share of output produced or sales made by a few large firms in the industry, indicating how much power these firms have in setting prices and controlling the market. Elasticity ratio (A) measures the responsiveness of quantity demanded to changes in price, while demand ratio (B) compares the quantities demanded of two goods at different prices. MC to ATC (D) ratio is used to understand the relationship between marginal cost and average total cost, but it does not directly reflect concentration in the industry.

A Way to Measure the Degree of Concentration in Oligopoly