If an industry evolves from oligopoly to monopolistic competition, we would expect
A) the four-firm concentration ratio to increase.
B) the four-firm concentration ratio to decrease.
C) the four-firm concentration ratio to remain the same.
D) barriers to entry to strengthen.

Question

Quizplus · Accepted Answer

In oligopoly, there are only a few dominant firms that control a large share of the market, resulting in a high concentration ratio. In monopolistic competition, there are many firms competing with one another, each with a smaller market share, leading to a lower concentration ratio. Therefore, we would expect the four-firm concentration ratio to decrease.

If an Industry Evolves from Oligopoly to Monopolistic Competition, We