One major problem with four-firm concentration ratios is that they fail to take into account
A) the localized market for products.
B) excess capacity in production.
C) price leadership.
D) mutual interdependence.

Question

Quizplus · Accepted Answer

Four-firm concentration ratios provide a broad overview of market concentration but fail to consider the localized market for products. A firm may dominate the national market but have little market power in a specific region of the country. Therefore, the concentration ratio would not be reflective of the actual market conditions. The other options, excess capacity in production, price leadership, and mutual interdependence, all relate to factors influencing market competition but are not directly related to the limitations of four-firm concentration ratios.

One Major Problem with Four-Firm Concentration Ratios Is That They