Question

1. Using the data below, calculate this industry’s four-firm concentration ratio. Does the industry favor competition or concentration?

                                    Firm                                                    Sales (millions)

                                    ======================================

                                    Clucky’s Fried Chicken                      $15

                                    Wings ‘R Us                                       10

                                    Breaded Hens                                      55

                                    Chicken Parts Restaurant                    11

                                    White Meat World                                   5

                                    Dark Meat Deli                                       8

                                    All other chicken restaurants               $7,550

                                                combined

Answer 1

Total sales = 15 + 10 + 55 + 11 + 5 + 8 + 7550 = 7654

Share of Clucky's = (15/7654)*100 = 0.20%
Share of Wings R Us = (10/7654)*100 = 0.13%
Share of breaded hens = (55/7654)*100 = 0.72%
Share of chicken parts = (11/7654)*100 = 0.14%
Share of white meat = (5/7654)*100 = 0.07%
Share of dark meat = (8/7654)*100 = 0.10%

Four firm concentration ratio = Market share of top four firms = 0.20 + 0.13 + 0.72 + 0.14 = 1.19%

As this ratio is less than 50% so this industry favours competition.