Concentration ratios provide a good measure of a firm's potential for exercising monopoly power.

Question

Quizplus · Accepted Answer

Concentration ratios, which measure the market share of the largest firms in an industry, can be a useful tool for identifying industries where a small number of firms have significant market power. A high concentration ratio indicates the presence of a dominant firm or firms who may be able to influence prices, output, and other market dynamics. Therefore, a high concentration ratio is a good indicator of a firm's potential for exercising monopoly power.

Concentration Ratios Provide a Good Measure of a Firm's Potential