Question

Total industry sales are $105 million. the top four firms account for sales of $10 million, $9 million, $8 million and $5 million, respectively. what is the four-firm concentration ratio?

Answer 1

A concentration ration is a ratio of the combined market shares of a given number of firms to the whole market size. Here, our combined market is $105 million. Our top four firms account for (10+9+8+5 = 32 million) in sales. The four-firm concentration ratio becomes (32 million)/(105 million) = 30.4 %.