Evaluate to what finish an increase in the concent balancen ratio of an diligence result benefit consumers The absorption ratio measures the extent to which a market place or industry is dominated by a few leading tightens. It is measured by the fate destiny of the largest dissipated in the industry by gages wish wagement and gross sales revenue. The higher the concentration ratio the stronger is the cop on the market held by the leading businesses. Consumer pointless(prenominal)(prenominal) measures the welf ar that consumers derive from their consumption of goods and divine services, or the benefits they derive from the exchange of goods. Consumer surplus is the difference between what consumers are willing to bear for a good or service (indicated by the position of the look at curve) and what they actually pay (the market price). The level of consumer surplus is shown by the ar ea beneath the demand curve and above the govern market price. if the concen tration ratio increased, then 1 or 2 firms whitethorn start to dominate the market and the firms will be commensurate to exercise Monopoly power. This is likely to have umpteen consequences to consumers. Monopoly Diagram In the above diagram the firm maximises profit where MR=MC at end product Qm. This turnout is allocatively inefficient because P > MC.
This voice consumers may face shortages and prices will tend to be higher, and output lower, than what would exist in a market with low barriers to entry. Also, if the firm faces little argument it will have less gift to develop new products and respo nd to the needs of the consumers, leading to! less innovation and less choice for consumers. The firm is also profitably inefficient, because it does not produce on the lowest point of the AC curve. Monopolies are also often inefficient because with less arguing they have less incentive to cut costs, e.g. they may pursue surplus labour. These costs are all passed onto the consumer in the shit of higher prices and mean there is less consumer surplus. Other...If you want to forge a full essay, order it on our website: OrderCustomPaper.com
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