Suppose there are seven firms in a market where the three largest firms supply 20% of the market-clearing quantity and the other four firms supply 10% of the market-clearing quantity. What is the five-firm concentration ratio (i.e., the share of total sales controlled by the five largest firms in the market)?

Question

Quizplus · Accepted Answer

The market share of the three largest firms is 20%, so the remaining market share is 80%. The market share of the other four firms is 10%, so the market share of the two largest firms among them is 10%/4 × 2 = 5%. Thus, the five-firm concentration ratio is 20% + 5% = 25%, which is closest to answer choice C (80%).

Suppose There Are Seven Firms in a Market Where the Three