Understanding Four-Firm Concentration Ratio in Industries A and B

Four-Firm Concentration Ratio:

The four-firm concentration ratio is calculated as the ratio of the sales of the four largest firms in the industry to the total industry sales.

Calculation for Industry B:

In industry B, there are four firms with equal sales of $2.5 million each. Therefore, the total sales for industry B would be $2.5 million x 4 = $10 million.

Four-Firm Concentration Ratio for Industry B:

When we calculate the four-firm concentration ratio for industry B, we divide the total sales of the four largest firms ($10 million) by the total sales of the industry ($10 million):

Four-Firm Concentration Ratio = $10 million / $10 million = 1.0

Therefore, the four-firm concentration ratio for industry B is 1.0, indicating that the top four firms in industry B control the entire industry sales.

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