Four-firm concentration ratios , Microeconomics

Assignment Help:

a) The four-firm concentration ratios for the following industries have been found from the Economic Census for Manufacturing (NAICS 31-33) as follows. The four-firm concentration is nothing but the percentage of total value of shipments (%) of the respective industry's "4 largest companies".

a. Fluid milk (311511) - 46%

b.Women's and girl's cut & sew dresses (315233) - 28.1%

c. Envelopes (322232) - 57.6%

d. Electronic computers (334111) - 86.9%

(b)   The industry involved in the manufacture of fabricated metal products is characterized by the highest level of competition with nearly 56,808 companies operating under the industry. The other industries involved in the manufacture of products namely printing and related support activities, miscellaneous items, printing, machine shops and threaded products, machinery, foods, machine shops, furniture and related products, etc are also characterized by a high level of competition with more than 20,000 companies operating in each segment.

The industry involved in the manufacture of men's and boy's underwear and nightwear is characterized by the lowest level of competition with just 7 companies operating under the industry. The other industries involved in the manufacture of products namely primary smelting and refining of copper, beet sugar, alumina refining, tobacco stemming and redrying, carbon black manufacturing, cane sugar refining, tire cord and tire fabric mills, household laundry equipment, guided missile and space vehicle, etc are characterized by a low level of competition since they have a total of less than 15 companies operating under the respective industry.

Oligopolies refer to a form of market wherein the industry is dominated by a small number of sellers or manufacturers. The characteristics of an oligopoly market are (1) An industry dominated by a few large firms, implying that there is a high degree of market concentration, (2) Firms manufacture and sell identical or differentiated products, (3) Industry has significant barriers to entry and (4) Firms are interdependent and the action of one firm will affect that of other industry players. As is evident from the above description, oligopolies are industries with very low level of competition. Hence the second list of industries namely primary smelting and refining of copper, beet sugar, alumina refining, tobacco stemming and redrying, cane sugar refining, etc fall into the category of oligopolies.

(c)    Oligopolies are markets wherein a very small number of firms account for a very large share of the industry's output. The industries with the highest percentage of total value of shipments for its 4 largest companies belong to oligopolies category. On adjusting the database, oligopolies were determined to be primary smelting and refining of copper (98.8%), household laundry equipment manufacturing (98.3%), underwear and nightwear knitting mills (98.1%), cigarette manufacturing (97.8%), space vehicle propulsion units and parts manufacturing (97.1%), cane sugar refining (95.2%), etc. A few firms in these industries with their characteristics (sales and number of employees) are included in the below table. All the below companies belong to large multinationals.

Firm

Industry

Sales ($ million)

Employees

Freeport-McMoRan Copper & Gold, Inc

primary smelting and refining of copper

18,982

39,200

Asarco LLC (Grupo Mexico)

primary smelting and refining of copper

1,704

2000

Whirlpool

household laundry equipment manufacturing

18,366

71000

General Electric

household laundry equipment manufacturing

150,211

287,000

Berkshire Hathaway, Inc

underwear and nightwear knitting mills

136,185

260,000

Hanesbrands Inc.

underwear and nightwear knitting mills

4,326.71

55,500

Altria Group Inc

cigarette manufacturing

24,363

10,000

Reynolds American Inc

cigarette manufacturing

8,551

5,750

(d)   Oligopolies have both good and bad to the society. The cons include the fact that oligopolies tend to be inefficient in the allocation of resources, charge a high price and produce less output and tend to increase the concentration of wealth and income. The pros include the facts that oligopolies lead to more product innovations and are able to take advantage of economies of scale thus lowering production costs and prices.

However, the cons of oligopolies do not apply to the above industries, since all their products are available cheap as compared to products of other industries which are in perfect competition. Besides, they certainly do not produce less output. There is not a large wealth concentration that these companies can exert influence over the economy, society or political system. However, all these businesses have allowed for economies of scale. The household laundry equipment manufacturing and underwear and nightwear knitting mills have also resorted to better R&D options thus offering better products to the society. Hence we cannot generalize that oligopolies are bad but they may be led in the wrong direction at times, which the countries must be beware of. However, the above determined oligopolies do not pose a threat to the society.


Related Discussions:- Four-firm concentration ratios

Price elasticity of demand, Problem: (a) Given TR = P×Q, Show that...

Problem: (a) Given TR = P×Q, Show that  Note: TR is total revenue, P refers to price, Q refers to quantity demanded, MR denotes marginal revenue, and ε d shows the p

Production, explain 6 factors that determine volume of production

explain 6 factors that determine volume of production

Arbitrage pricing theory, Arbitrage Pricing Theor y Arbitrage ...

Arbitrage Pricing Theor y Arbitrage defines the procedure of continuously buying a security for privacy, currency, or commodity on one market and selling it in another

Long run equilibrium - perfect competition, Long run equilibrium - Perfect ...

Long run equilibrium - Perfect competition: In the long-run, on the other hand, the firm in perfect competition is making normal profit or zero economic profit as shown in Fig

Perfect competition in neoclassical economics, Q. Perfect Competition in ne...

Q. Perfect Competition in neoclassical economics? Perfect Competition: An abstract assumption, central to neoclassical economics, in that companies are so small that none can i

Atmospheric Pollution, Earth is completely surrounded by thick envelope of ...

Earth is completely surrounded by thick envelope of gases called atmosphere. Atmosphere is sub divided into different layers depending upon the distance from the sea level. The

Monopolist, if a monopolist makes economic profits, new firms enter the mar...

if a monopolist makes economic profits, new firms enter the market and compete with the monopolist in the long run.

Determine the returns to scale, Determine the Returns to Scale Use the f...

Determine the Returns to Scale Use the following production function and budget constraint to answer the questions below. Q = L + K                            1000 = 2L +

Define average total cost and average variable cost, Define Average Total C...

Define Average Total Cost and Average Variable Cost Average Total Cost:    The amount spent on producing every unit of output. The average cost is calculated by dividing the t

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd