Question

The top six firms in an industry have total sales of the following respectively: $70 million, $40 million, $40 million, $30 million, $10 million, $10 million; sales of all other firms in the industry totals $20 million. For this industry, what is the 4-firm concentration ratio? Based on the value calculated, what market structure does this industry represent and why?

Answer 1

- Four firm Concenteration ratio (MC) is the Share in (percent) of Four largest froms market Let's Convert Sales T Value in perscant (1) from A = / 70 Xloo total sales) 70 Tot 404 40+30 flotio +20 X100 70 - -X100 220 I 31- 81 % firm 1.40 Xlou = 18.18 . 220 from c = ho 220X100 - 18. 18-). firm D 130 220 X100 136 6 3-). .. 46 31-81 +18.18 + 18-18 + 13.63 Tue uc - 81-807

If the value of four from concentration ratio is zero then the market is very muchcompetitive

If if the value lies between 50 to 80% then the industry is said to have very much oligopoly

But if it is between 80 to 100 % then the market is said to have very high concentrated

So the answer here is is very concentrated market structure