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Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383

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BuyFindarrow_forward

Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383
Textbook Problem

Concentration ratios have often been used to note the tightness of an oligopoly market. A high concentration ratio indicates a tight oligopoly market, and a low concentration ratio indicates a loose oligopoly market. Would you expect firms in tight markets to reap higher profits, on average, than firms in loose markets? Would it matter if the markets were contestable? Explain your answers.

To determine

Explain the firms in tight markets to gain higher profit than the firms in loose markets.

Explanation

A high concentration ratio represents a tight oligopoly market and low concentration ratio represents a loose oligopoly market. The range of 80% to 100% indicates a high concentration ratio, which leads to achieve the degree of monopoly power. If the oligopoly firm has monopoly power, it will charge a high price for their products...

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