A market in which hhi exceeds 1800 is regarded as

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Unformatted text preview: A market in which HHI exceeds 1800 is regarded as being uncompetitive • The three main limitations of using only concentration measures as determinants of market structure are their failure to take proper account of the geographical scope of the market, barriers to entry and firm turnover, and the correspondence between a market and an industry What are markets and firms? • Markets can coordinate production • Taking account of the opportunity cost of time as well as the costs of the other inputs, firms use the method that costs least • Firms are more efficient than markets as coordinators of economic activity because they can achieve lower transaction costs, economies of scale, economies of scope, and economies of team production • Transaction costs are the costs that arise from finding someone with whom to do business, of reaching an agreement about the price and other aspects of the exchange, and of ensuring that the terms of the agreement are fulfilled • When the cost of producing a unit of a good falls as its output rate increases, economies of scale exist • A firm experiences economies of scope when it uses specialized (and often expensive) resources to produce a range of goods and services • It is firms rather than markets that coordinate most of our economic activity...
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