power. If the company charges the monopoly price then it will be producing a smaller quantity than the competitive equilibrium. Q4 Forey, Inc., competes against many other firms in a industry. Over the last decade, several firms have entered this industry and, as consequences, Forey is earning a return on investment that roughly equals the interest rates. Furthermore, the four-firm concentration ratio and Herfindahl Hirschman index are both quite small. Based on this information, which market structure best characterizes the industry in which Forey competes? Explain the characteristics this market structure and what happens to the Forey Inc’s profit in the short-run and long-run. Ans- From the information given about the industry competitive market structure best characterized the industry because its return decreases when any new firms enters the market and also herfindahl Hirschman and four firm concentration index are both quite small so no one has significant market power to set or influence the market price. Coming to the second part of the question in the long term the Forey Inc. industry will make only normal economic profit and in short run the profit will decrease more and more when any new firm will enter the market
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