Question

You are told that the four-firm concentration ratio in an industry is 20.
Based on this information you can conclude that:

A) each of the top four firms has 20 percent of industry sales.
B) the four largest firms account for a combined 80 percent of the industry
C) sales. the four largest firms account for 20 percent of industry sales.
D) each of the four largest firms accounts for 5 percent of industry sales.

Answer 1

Answer:

Correct option is (C)

Explanation:

Concentration ratio estimates the position  or size of a company as compared to the industry in terms of percentage. It states the firm's share in the industry. There are two firm, four firm and eight firm concentration ratios.

In four-firm concentration ratio, the four firms combined together holds 20 percent of industry sales. 80 percent is held by other firms. Higher ratio indicates that there are less competitors in such markets while lower ratio indicates more competition.