Evaluate To What Extent An Increase In The Concent

Evaluate to what finish an increase in the concent balancen ratio of an industry result benefit consumers

The concentration ratio measures the extent to which a market or industry is dominated by a few leading tightens. It is measured by the fate share of the largest firm in the industry by gages wish wagement and sales revenue. The higher the concentration ratio the stronger is the cop on the market held by the leading businesses.
Consumer pointless(prenominal) measures the welfare that consumers derive from their consumption of goods and services, or the benefits they derive from the exchange of goods. Consumer surplus is the difference between what consumers are willing to pay 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 under the demand curve and above the govern market price.

if the concentration ratio increased, then 1 or 2 firms may start to dominate the market and the firms will be able 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 output is allocatively inefficient because P > MC.



This office 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 bonus to develop new products and respond to the needs of the consumers, leading to less innovation and less choice for consumers. The firm is also productively inefficient, because it does not produce on the lowest point of the AC curve. Monopolies are also often inefficient because with less competition they have less incentive to cut costs, e.g. they may employ surplus labour. These costs are all passed onto the consumer in the stool of higher prices and mean there is less consumer surplus.
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