Concentration Ratios in Manufacturing
ECO 204 Principles of Microeconomics
June 28, 2011
Industries go through a lot of changes to make themselves successful. There is so much competition that they have to keep up with the market. Using the concentration ratio which is the share of industry output in sales or employment accounted for by the top firms (Karl Case, Ray Fair, Sharon Oster 2009 p285). Porter explains that there are five forces that determine industry attractiveness and long-run industry profitability. These five "competitive forces" are The threat of entry of new competitors (new entrants), the threat of substitutes, the bargaining power of buyers, the bargaining power of suppliers, the degree of rivalry between existing competitors (Karl Case et al 2009 p.284).Concentration ratios show the calculation based on the market shares. Using the percentage of value of shipments accounted for firms in 2007 a lot of answer will be given to the following question.
Find the four-firm concentration ratios for the following industries: fluid milk, women’s and girl’s cut and sew dresses, envelopes, and electronic computers. Which industries are characterized by a high level of competition? Which industries are characterized by a low level of competition? Define oligopolies and identify which of the listed industries qualify as oligopolies? Name and describe some of the firms that operate in the listed industries that qualify as oligopolies. Discuss whether or not oligopolies are always bad for society, using examples from the firms I describe. Firms in highly competitive industry face a lot of challenges. Barriers to entry are factors that prevent new firms from entering and competing in imperfectly competitive industries (Karl Case et al, 2009 p270). Highly competitive industries have low barriers entry and a large number of firms. Fluid milk has a total of 280 companies; total value of shipments (TVS) (by $1,000) is $33,547,992...
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