Question

answer the below question please make sure it is clear , thanks

Q2. Ten firms compete in a market in Dubai to sell drinking water. The total sales of all the firms are 2million dirhams. Ranking the firms' sales from highest to lowest, we find the top four firms’ sales to be 260,000 AED, 220,000 AED, 150,000 AED and 130,000 AED respectively. a) Calculate the four-firm concentration ratio in this market? b) Comment on your finding in the above question. Is this market competitive?

Answer 1

Solution:-

(A) Four-firm concentration ratio = (X1+X2+X3+X4) /T

X= sales of Each firm

T= total sales of market

Four firm concentration ratio = (260000AED+220000AED+150000AED+130000AED) / 2000000 AED

= (760000AED)/2000000 AED

= 0.38*100

= 38%

so the four firm concentration ratio is 38%.

(B) Yes the market is competitive. generally the concentration ratio is 0-40% ranges indicates that Market is highly competitive.here the four firm concentration ratio is 38% which is less than 40% so that means no single or group of companies control this drinking water market of dubai.