What is the computing? in terms of math


Industry structure is often measured by computing the Four-Firm Concentration Ratio. Suppose you have an industry with 20 firms and the CR is 20%. How would you describe this industry? Suppose the demand for the product rises and pushes up the price for the good. What long-run adjustments would you expect following this change in demand? What does your adjustment process imply about the CR for the industry? Now consider that the industry has 20 firms but the CR for the industry is 80% instead of 20%. How would you describe this industry? What are some reasons why this industry has a high CR while the other industry had a low CR? Is it possible for smaller firms to thrive and profit in such an industry? How?

Do a little research, then take a shot. What do you think?

My thinking is 40% CR, and smaller frims would thrive, due to less overhead. What is you take ?

My thinking is 40% CR, and smaller frims would thrive, due to less overhead. What is you take ?

I don't understand how you answer addresses the original question(s)

An industry with 20 firms and a CR of 20% means that all firms are exactly the same size. Which implies that the industry is highly competitive and there is no improvement from economies of scale. An increase in demand would likely cause more firms to enter (rather than each existing firm expanding). Economic profits would be squeezed to zero.

An industry with a 80% CR is most like an oligopoly. Oligopolies arise from a variety of reasons. a) barriers to entry, b) huge capital start-up costs, c) limited access to a critical component or natural resource, orownership of a critical patent, d) large economies of scale, e) governement intervention, f) etc.

Economic models of oligopolies tend to vary depending on specific circumstances. That said, usually, the dominant firms in the oligopoly will exercise some monopoly powers. As such, the dominant firm will set P at points above MC=MR and earn economic profits.

Small firms can thrive and profit in an oligopoly if, for example, it has access to the critical resource, or patent, or government protection. Small firm will also thrive if it can maintain marginal costs under the price set by the dominant firm. (However, if there are gains from economies of scale, the small firm may easily get gobbled up by a larger firm).

I hope this helps.

Thank You

In terms of math, computing refers to the process of performing mathematical calculations or operations using electronic devices such as computers.

Now let's analyze the questions related to the Four-Firm Concentration Ratio (CR) and its implications for the industry:

1. Suppose you have an industry with 20 firms and the CR is 20%. How would you describe this industry?
To calculate the Four-Firm Concentration Ratio, we need to add up the market shares (measured by sales or production) of the four largest firms in the industry. In this case, if the CR is 20%, it means that the combined market share of the four largest firms is 20%. Therefore, it suggests that the industry is relatively fragmented, with no single dominant firm.

2. Suppose the demand for the product rises and pushes up the price for the good. What long-run adjustments would you expect following this change in demand?
In the long run, an increase in demand and higher prices would likely attract new firms to enter the industry to take advantage of the profit potential. This would increase the number of firms in the industry.

3. What does your adjustment process imply about the CR for the industry?
The adjustment process implies that the CR for the industry would decrease. As new firms enter the industry, the market share of the existing firms would be diluted, resulting in a lower concentration ratio.

4. Now consider that the industry has 20 firms but the CR for the industry is 80% instead of 20%. How would you describe this industry?
In this case, a CR of 80% indicates that the combined market share of the four largest firms is 80%. This suggests a highly concentrated industry, with a few dominant firms controlling a significant portion of the market.

5. What are some reasons why this industry has a high CR while the other industry had a low CR?
There could be several reasons for a high CR in an industry. Some possible reasons include barriers to entry, such as high initial investment requirements or specialized technology, which make it difficult for new firms to enter and compete. Additionally, economies of scale, strong brand loyalty, or exclusive control over essential resources may contribute to a high CR.

6. Is it possible for smaller firms to thrive and profit in such an industry? How?
While a high CR suggests that smaller firms may face challenges in competing with dominant firms, it is still possible for them to thrive and profit. Smaller firms can differentiate themselves by offering unique products or services, targeting niche markets, providing exceptional customer service, or implementing innovative strategies. By focusing on specific segments or adopting a niche strategy, smaller firms can carve out their own market share and compete effectively. Additionally, regulatory policies that promote competition or technological advancements may also create opportunities for smaller firms to thrive in a highly concentrated industry.