Consider an industry that is made up of nine firms each with a market share (percent of sales) as follows:
a. Firm A: 30%
b. Firm B: 20%
c. Firms C, D, and E: 10% each
d. Firms F, G, H, and J: 5% each
What is the value of the four-firm concentration ratio and how is the industry categorized?
A) 50%; monopolistic competition
B) 70%; oligopoly
C) 75%; oligopoly
D) 80%; strongly oligopolistic

Question

Consider an industry that is made up of nine firms each with a market share (percent of sales) as follows: 
a. Firm A: 30%
b. Firm B: 20%
c. Firms C, D, and E: 10% each
d. Firms F, G, H, and J: 5% each
What is the value of the four-firm concentration ratio and how is the industry categorized?
A) 50%; monopolistic competition
B) 70%; oligopoly
C) 75%; oligopoly
D) 80%; strongly oligopolistic

Quizplus · Accepted Answer

The four-firm concentration ratio is the sum of the market shares of the four largest firms in an industry. In this case, the four largest firms are A, B, C, and D, with market shares of 30%, 20%, 10%, and 10%, respectively. Therefore, the four-firm concentration ratio is 30% + 20% + 10% + 10% = 70%. This indicates that the industry is an oligopoly, which is a market structure characterized by a small number of large firms that control a majority of the market share.

Consider an Industry That Is Made Up of Nine Firms