Is it possible for a small firm with a low concentration ratio to thrive and profit in an industry?

Answer 1

Yes, but it depends upon the industry. There is a list of industries with low concentration ratios (in which the largest four firms have only a small fraction of the total business) at
http://en.wikipedia.org/wiki/Concentration_ratio

Answer 2

6)Assume the graph below represents the market demand for a patented prescription drug together with the firm-level marginal cost and average cost functions for producing the drug. Assume these cost curves do not reflect R&D costs of developing this drug, but only reflect production costs of the drug once the formula for it is known. (Note: the diagram assumes that in the output range from 250-400 thousand MC =ATC = $20). Rising MC at Q>400,000 increases ATC.)