FIGURE 11- 2
-Consider the following characteristics of a particular industry: - the four- firm concentration ratio is 78% (in the relevant market)
- each firm produces output where P MC
- the products are highly differentiated This industry is likely to be

Question

FIGURE 11- 2 
-Consider the following characteristics of a particular industry: - the four- firm concentration ratio is 78% (in the relevant market)
- each firm produces output where P > MC
- the products are highly differentiated This industry is likely to be

Quizplus · Accepted Answer

The high concentration ratio and highly differentiated products suggest that the industry is dominated by a few large firms, which is typical of an oligopoly. The fact that each firm is able to charge a price above marginal cost indicates that there is some market power, but not to the extent that it would be considered a monopoly. Perfect competition would require many small firms, while monopolistic competition would require lower concentration and more substitution between products. A cartel implies collusion among firms, which is not indicated by the information given.