Essay 1

Traditionally, the Four-Firms Concentration Ration is used as an indicator of the relative size of firms to the industry as a whole. Basically this ratio provides a researcher with information about the current situation in the industry where the firm operates and the position of the firms. Furthermore the Four-Firms Concentration Ratio may be very helpful in determining the market form of the industry analyzed.
Obviously it is very important information a researcher can get. Basically the Four-Firms Concentration Ratio consists of the market share, as a percentage, of the four largest firms in the industry. Taking into consideration all these facts concerning the Four-Firms Concentration Ratio it would be possible to say what is the firms size and their role in the industry as well as the market form of the industry at large regardless any other specific information about this industry.
In such a situation, when the Concentration Ratio in the industry consisting of 20 firms constitutes 30% than it would be possible to say that the industry may be characterized as a relatively open and consisting of the companies which, having a few leaders still are relatively equal in size. At least leaders that are not absolutely unattainable for the rest of the companies operating in the industry. As for the market form of the industry it is rather close to monopolistic competition which implies the presence in the market several strong firms competing with each other and the rest of the companies that aims at the attaining the status of the industry leader and it is still not too late to do it. Furthermore, companies operating in the industry produce similar but not very substitutable products and all of them are profit maximizes. Such a market situation is characterized by high attractiveness for entering by other firms on the condition that profits are high enough. Also it is important to underline that among the firms operating in the industry with such a Concentration Ratio there are no firms, which could be price takers.
However, practically every industry changes and the market form may change as well. As a result it is possible to presuppose that if the situation changes, for instance demand grows causing the growth of prices than it will obviously lead to the change of the Four-Firms Concentration Ratio. As a rule the growing demand leads to the appearance of leaders of the industry which would be more successful than others in supplying the demand. In such a situation the Concentration Ratio will grow and the wider gap between the industry leaders and the rest of the industry is the higher Four-Firms Concentration Ratio will be.
The situation will be particularly dramatic if the Four-Firm Concentration Ratio attains 80%. Such industry may be characterized as Oligopoly, when the market is controlled by a small group of firms and it is very problematic to enter the market for a new firm and smaller firms are permanently deprived and are in a very bad position because the ‘rules’ of operating in the market are dictated by a few largest companies. Eventually, the growth of the Concentration Ratio may lead to the formation of the monopoly market when the ratio is about 100%. But even in oligopoly, dominating companies may establish their own prices which may be lower than objective prices for the rest of the companies since they have opportunities to gain more since their share of the market is significantly larger than that of smaller firms.
Finally it should be pointed out that movement to monopoly market leads to disappearance of competition, which in its turn, leads to the degradation of the quality of products or services of the monopolistic firm.

Essay 2
The price-fixing is a real problem, especially when it concerns companies cooperating with the government. For instance, recently the Irving Materials Inc. has been fined for 29 million dollars for price-fixing. State and federal transportation officials barred the Greenfield-based company as a prime contractor after IMI acknowledged it had conspired to fix price of ready-mix concrete in central Indiana.
Nonetheless, the government continues to work with this company but now it does its work as a subcontractor or supplier as well as it may still work for other state agencies. For instance, it has already been subcontracted to provide 3.3 mln dollars in concrete for the foundation of a new stadium for the Indianapolis Colts. The arguments of the state in such a situation are based on the idea that it is individuals but not the company at large that are responsible for price-fixing this is why it is necessary to keep charged officials from projects along with getting back any money that the state was overcharged.
In fact this example is very important since it underlines the role of the government in the market. Obviously it is desirable the government is kept from intervention in the market but it is hardly possible to do because objectively it is necessary to regulate the rules that regulates the market that is practically impossible without the state’s assistance. Anyway, in the open market economy the government should be a symbol of fair and public work and the cooperation with price-fixing companies is unacceptable since it deteriorates the image of the government and belief in its fair and nationally useful work.
Nowadays, it becomes more and more difficult for the government to control the situation since transnational corporations are developing and economic acquires global features. Nonetheless it is necessary to keep state in economy as a mediator between large companies and employees in order to sustain social and economic balance.

Bibliography:
1. Despite price fixing, concrete company still in government business, retrieved 10.27.2005 from http://www.pal-item.com/apps/pbcs.dll/article?AID=/20051020/NEWS01/510200330/1008.
2. Linkin, K. The Concentration Ratio and the Market Economy. New York: New Publishers, 1999.
3. Petersen, J. The Market Structure. New York: Routledge, 2001.