TSR Wiki > Study Help > Subjects and Revision > Revision Notes > Economics > Market concentration
There are two important ways of measuring how close a particular market is to being a monopoly:
- Concentration ratio - A measure of the market share of the largest n firms in the industry. Expressed as a percentage. For example, the 5-firm concentration ratio for supermarkets (oligopoly) would be larger than that of carpenters. Concentration ratios may be calculated on the basis of shares in output or shares in employment; for analysis of market structure, shares in output are more useful.
- Minimum efficiency of scale - the smallest size at which a firm is efficient. A steelworks will have a high MES because the industry is capital intensive with large economies of scale. Therefore the steelworks industry is more likely to be monopolistic.
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