Suppose a ten firm industry has total sales of $35 million per year. The largest firm have sales of $10 million, the third largest firm has sales of $4 million, and the fourth largest firm has sales of $2 million. If fifth through tenth largest firms combined have annual sales of $12 million, the four-firm concentration ratio for this industry is

Question

Quizplus · Accepted Answer

The four-firm concentration ratio is calculated by adding the sales of the four largest firms and dividing by the total sales of the industry. The sales of the second largest firm are not given directly, but can be inferred because we know the total sales, the sales of the first, third, and fourth largest firms, and the combined sales of the fifth through tenth firms. The total sales of the four largest firms are $10 million (1st) + $9 million (2nd, inferred as $35m total - $10m - $4m - $2m - $12m for 5th-10th) + $4 million (3rd) + $2 million (4th) = $25 million. The concentration ratio is then $25 million / $35 million = 0.714 or 71.4%. Since none of the provided options exactly match this calculation, the correct answer based on the options given is D) none of the above.

Suppose a Ten Firm Industry Has Total Sales of $35