Question

Consider the concept of market concentration. Explain how you can tell that the pharmaceutical industry has a higher market concentration than that of the restaurant industry? Provide a reason why the market concentration in pharmaceutical industry is higher. Clearly explain your answer.

Answer 1

Answer - The pharmaceutical business is a business which will be called the competitive business or it is said to exist in perfectly competitive market. The products are exactly the same with the same price. All the firms entering have the same products .

In the restauranr business , it is monopolistic competition as there is some amount of differentiation in the food of every restuarant. Due to this reason , there is higher concentration ratio of firms in pharmaceutical business than the restaurant business