A Level Economics AQA Practice Exam

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Prepare for the A Level Economics AQA Exam with our interactive quiz. Test your knowledge with multiple choice questions and detailed explanations. Equip yourself with the tools needed for success!

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What does the Nth firm concentration ratio measure?

The profit margin of the leading firm in the market
The total revenue of all firms combined
The market share held by the top N firms in the market
The number of firms in the market

The correct answer is: The market share held by the top N firms in the market

The Nth firm concentration ratio is a metric used to assess the extent of market concentration within an industry by measuring the combined market share of the top N firms. It provides insight into how much of the market is dominated by the largest firms, which can indicate the level of competition or monopoly power in a market. A higher concentration ratio suggests that a substantial portion of the market is held by a few firms, potentially leading to less competitive behavior and higher prices for consumers. Hence, understanding the concentration ratio is crucial for analyzing market structures and competitive dynamics. The other choices do not accurately represent what the Nth firm concentration ratio measures. The profit margin of the leading firm relates to profitability rather than market share. The total revenue of all firms combined encompasses the overall sales figures but does not provide information about the distribution of that revenue among the top firms. The number of firms in the market pertains to market structure yet does not indicate the market power or share of the leading firms.