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7-3 Industry Analysis  Market Structure –Number and size of firms. –Industry concentration. –Technological and cost conditions. –Demand conditions. –Ease of entry and exit.  Conduct –Pricing. –Advertising. –R&D. –Merger activity.  Performance –Profitability. –Social welfare.
 Industries dramatically vary with respect to concentration levels. –The four-firm concentration ratio and Herfindahl- Hirschman index measure industry concentration.  The Lerner index measures the degree to which firms can markup price above marginal cost; it is a measure of a firm’s market power.  Industry performance is measured by industry profitability and social welfare..
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