Understanding Four-Firm Concentration Ratio in Industry Sales

Calculating Four-Firm Concentration Ratio

Total industry sales: $90 million

Sales of Firm A: $15 million

Sales of Firm B: $3.5 million

Sales of Firm C: $1.3 million

Sales of Firm D: $0.8 million

First, we need to calculate the total sales of the top four firms:

Total sales = $15 million + $3.5 million + $1.3 million + $0.8 million = $20.6 million

Now, we can use the formula for the four-firm concentration ratio:

Four-Firm Concentration Ratio = Total sales of the top four firms / Total industry sales

Four-Firm Concentration Ratio = $20.6 million / $90 million

Four-Firm Concentration Ratio = 0.228 = 0.23

Therefore, the four-firm concentration ratio for the given industry sales data is 0.23, indicating that the top four firms hold approximately 23% of the total market share in the industry.