A concentration ratio can be used to measure:
A)whether a few large companies in a certain industry possess significant market power
B)the size of a specific industry
C)the benefits to consumers of market domination by one company
D)how elastic a market demand curve will be
E)how inelastic a market demand curve will be

Question

Quizplus · Accepted Answer

A concentration ratio measures the percentage of market share held by a certain number of companies in a specific industry. A high concentration ratio suggests that a few large companies dominate the market, indicating the potential for market power and possibly anti-competitive behavior. Therefore, option (A) is the best choice. Option (B) is incorrect since the concentration ratio does not measure the size of the industry, but rather the market share concentration. Options (C), (D), and (E) are also incorrect since the concentration ratio does not provide any information regarding the benefits to consumers or the elasticity of the market demand curve.

A Concentration Ratio Can Be Used to Measure