Suppose there are 100 firms in an industry. If the leading firm has a 50 percent market share, the second largest firm has a market share of half the leader's, the third has a market share of half the second's, and the fourth largest has a market share of half the third's, what is the four-firm concentration ratio?
A) 6.25 percent
B) 100.00 percent
C) 75.50 percent
D) 93.75 percent
E) 99.75 percent

Question

Quizplus · Accepted Answer

The leading firm has a 50% market share. The second largest firm has half of that, which is 25%. The third largest firm has half of the second's, which is 12.5%. The fourth largest has half of the third's, which is 6.25%. Adding these together gives a four-firm concentration ratio of 93.75%.

Suppose There Are 100 Firms in an Industry