Question

Which of the following industry types typically has a four-firm concentration ration less than 40%?

A. Pure competition

B. Oligopoly

C. Pure monopoly

Answer 1

Option A. Pure competition

Explanation: In an oligopoly, there a few large firms in the market which controls the entire market. The four-firm concentration ratio in an oligopoly is generally greater than 90%.

In a pure monopoly, there is only one firm controlling the entire market. So, the concentration ratio in a pure monopoly is near 100%.

In pure competition, there are a large number of small firms having a very small share of the market. In pure competition, the four-firm concentration ratio tends to be 0%.