Suppose that an industry consists of 100 firms, and the top 4 firms have annual sales of $1 million, $1.5 million, $2 million, and $2.5 million, respectively. If the entire industry has annual sales of $8.5 million, the four-firm concentration ratio is approximately
A) 82 percent.
B) 50 percent.
C) 94 percent.
D) 70 percent.

Question

Quizplus · Accepted Answer

The four-firm concentration ratio is the percentage of total industry sales accounted for by the top four firms. In this case, the top four firms have sales of $1 million, $1.5 million, $2 million, and $2.5 million, for a total of $7 million. The entire industry has sales of $8.5 million, so the four-firm concentration ratio is $7 million/$8.5 million * 100 = 82.35%, which is approximately 82%.

Suppose That an Industry Consists of 100 Firms, and the Top