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 B is:

Question

Quizplus · Accepted Answer

The four-firm concentration ratio is calculated by adding up the market share of the top four firms in the industry. 
In industry A:
Market share of the top 4 firms = (5+2+1+1)/10 = 0.9
In industry B, there are only four firms, each with equal sales of $2.5 million. So, the market share of the top 4 firms is:
Market share of the top 4 firms = 4*2.5/10 = 1
Therefore, the four-firm concentration ratio for industry B is 1.0.

Suppose That There Are Two Industries, a and B