Suppose an industry consists of 20 firms. Each firm's share of total sales in the industry is 5 percent. If two of the firms merge, then the four-firm concentration ratio in the industry will
A) remain unchanged.
B) decrease as there are fewer firms in the industry.
C) increase.
D) depend on the market condition faced by the industry.

Question

Quizplus · Accepted Answer

The four-firm concentration ratio measures the total sales of the four largest firms in the industry as a percentage of total industry sales. If two firms merge, the total sales of the four largest firms will increase, thereby increasing the concentration ratio. Therefore, the answer is (C) increase.

Suppose an Industry Consists of 20 Firms