Suppose an industry has four largest firms with market shares of 30%, 25%, 20%, and 15%. What is the four-firm concentration ratio for this industry?

• A. 90%
• B. 100%
• C. 80%
• D. 70%

Answer: (A)

Verified step by step guidance

1. Understand that the four-firm concentration ratio (CR4) measures the total market share held by the four largest firms in an industry. It is calculated by summing their individual market shares.
2. Identify the market shares of the four largest firms given in the problem: 30%, 25%, 20%, and 15%.
3. Express these percentages as decimals or keep them as percentages for summation. Since they are already percentages, you can sum them directly.
4. Add the market shares together: \$30\% + 25\% + 20\% + 15\%$.
5. The result of this sum gives the four-firm concentration ratio, which indicates the combined market power of the top four firms in the industry.