Which of the following represent important shortcomings of using industry concentration ratios to determine whether the combination of certain firms will result in an increase in market power?
A) Frequent inability to define what constitutes an industry
B) Failure to measure ease of entry or exit for other firms
C) Failure to account for foreign competition
D) Failure to account properly for the distribution of firms of different sizes
E) All of the above

Question

Quizplus · Accepted Answer

All of the above options are important shortcomings of using industry concentration ratios to determine market power. Industry concentration ratios do not account for the complexity of defining industries, the ease of entry or exit for other firms, the presence of foreign competition, and the distribution of firms of different sizes. Therefore, using only concentration ratios to determine market power can lead to an inaccurate assessment of market competition.

Which of the Following Represent Important Shortcomings of Using Industry