Order the following markets in terms of their four firm conc

Order the following markets in terms of their four firm concentration ratio: A duopoly, a monopoly, a perfectly competitive (PC) market with 50 firms, and a perfectly competitive market with 150 firms.

A. Monopoly = Duopoly > PC with 50 firms > PC with 150 firms

PC with 150 firms > PC with 50 firms > Duopoly = Monopoly

Monopoly > Duopoly > PC with 50 firms > PC with 150 firms

Monopoly = Duopoly > PC with 150 firms > PC with 50 firms

Solution

A. Monopoly = Duopoly > PC with 50 firms > PC with 150 firms

Explanation: The four-firm concentration ratio refers to the percentage of market share held by the largest four firms in the market. A monopoly is a single firm in a market. Therefore, the four-firm concentration ratio in a monopoly is 100%

In a duopoly, there are only two large firms in the market. Therefore, the four-firm concentration ratio in a duopoly is 100%

In a perfectly competitive firm, there are a large number firms and each firm has around the same market share. Also, since each firm has around the same market share, the four-firm concentration ratio in the perfectly competitive market with 50 firms will be higher than the four-firm concentration ratio in the perfectly competitive market with 150 firms.

So, the right answer is : Monopoly = Duopoly > PC with 50 firms > PC with 150 firms