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Chapter 26: Q. 2 - For Critical Thinking (page 595)

If a dominant firm cannot maintain a cost advantage over other fringe firms in the industry, why might we anticipate that eventually its "dominance" might disappear? (Hint: What would happen to the number of fringe producers if the dominant firm were to earn economic profits and then what would happen over time to the dominant firm's profits?

Short Answer

Expert verified

The structural phenomenon of industrial concentration occurs when a few large firms dominate production in an industry or the economy as a whole.

Step by step solution

01

Given information

That are given sentences are :

Over other fringe firms in the industry.

02

Explanation 

Industrial concentration is a structural phenomenon in whichsome largecorporations dominatethe productionof the industry or the economy as a whole. Concentration, onceconsidered a sign of "market failure," is now widely accepted as a sign ofgood economic performance. In the early 1970s, YaleBrosen, amajor contributor to the newmindset, called thetransition of the profession on this issuethe "revolution of economics."Nevertheless, industrial concentration is amatter of publicpolicy.

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