4Firm Concentration Ratio Essay Example | Topics and Well Written Essays - 500 words

4Firm Concentration Ratio - Essay ExampleThe reason is that the demand curve is higher than the average number cost curve. However, in the long run following this channelise in the demand, many firms testament be attracted to the industry to capture the sparing profit since at that place is free entry and exit and this causes the economic profit to disappear.The adjust process implies that the industry will continue to maintain the 30% CR because those who look for the economic profit have gone. Monopolistic competition operates only at a normal profit in the long run therefore the industry will maintain monopolistic competition.Suppose the industry has 20 firms but the CR for the industry is 80% instead of 30%, this means that the largest four firms are irresponsible 80% of the total market sales. This type of industry is called oligopoly. In oligopoly, each of the oligopolies faces a downward sloping demand curve, finiss of one firm influence the decision of another and as s uch they watch each other keenly. Oligopolies do not change prices occasioned by minor adjustments in prices of raw materials, they only change when there are major changes in the general cost of production. In the long run prices do change.c) Products products play important role in find out CR of an industry.