Question

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:
a. 0.7.

b. 0.8.

c. 0.9.

d. 1.0.

Answer 1

Answer:

d. 1.0.

Explanation:

Four-firm concentration ratio is the ratio of the sales of the four largest firms in the industry relative to total industry sales. In industry B total sales is of $10 million and the top four combined have total sales of $10 million

Therefore, the four firm concentration ratio = $10 million/ $10 million = 1

Therefore correct answer is option B i.e. 1.0