Which of the following industries is most likely to have the highest four-firm concentration ratio?

• A. Local restaurants
• B. Automobile manufacturing
• C. Retail grocery stores
• D. Hair salons

Answer: (B)

Verified step by step guidance

1. Understand that the four-firm concentration ratio measures the market share held by the four largest firms in an industry, indicating the level of market concentration and competition.
2. Consider the characteristics of each industry: Local restaurants and hair salons are typically numerous and fragmented, with many small competitors, leading to a low concentration ratio.
3. Retail grocery stores have some large chains but also many smaller stores, so the concentration ratio is moderate but not extremely high.
4. Automobile manufacturing is dominated by a few large firms that control a significant portion of the market, resulting in a high four-firm concentration ratio.
5. Therefore, by comparing the market structures, identify automobile manufacturing as the industry most likely to have the highest four-firm concentration ratio.