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Class03_17 - Class Notes(cover part of Chapter 10 in the...

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17/03/2008 Class Notes (cover part of Chapter 10 in the textbook) Class Outline Markets and the competitive environment Perfect Competition Markets and the competitive environment Economists identify four types of industries: 1. Perfect Competition 2. Monopolistic Competition 3. Oligopoly 4. Monopoly Measures of Industry Concentration 1. Four-Firm Concentration Ratio (CR): percentage of the value of sales accounted for by the four largest firms in an industry. The greater the CR the more concentrated the industry is. Let’s see some examples! Degree of competition (Low to High) Monopoly Oligopoly Monopolistic competition Perfect competition 1
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Examples : Table 1. Percentage of sales by firm, Industry 1 F1 F2 F3 F4 F5 F6 F7 F8 20% 20% 20% 20% 5% 5% 5% 5% In this example the largest four firms account for 80% of the market sales CR=80 Table 2. Percentage of sales by firm, Industry 2 F1 F2 F3 F4 F5 F6 F7 F8 30% 30% 10% 10% 5% 5% 5% 5% Also in this example the largest four firms account for 80% of the market sales CR=80 2.
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