Suppose that there are two industries,A and B. There are five firms in industry A with sales at $5 million, $2 million, $1 million, $1 million, and $1 million, respectively. There are four firms in industry B with equal sales of $2.5 million for each firm. The four-firm concentration ratio for industry A is:

Question

Quizplus · Accepted Answer

The four-firm concentration ratio is calculated by adding the sales of the top four firms in the industry and dividing by the total sales of the industry. For industry A, the top four firms have sales of $5 million, $2 million, $1 million, and $1 million, totaling $9 million. The total industry sales are $10 million ($5m + $2m + $1m + $1m + $1m). Therefore, the four-firm concentration ratio is $9 million / $10 million = 0.9 or 90%.

Suppose That There Are Two Industries,A and B