Question

The sales of the top dozen firms and the rest of this market are as follows: (Firm A,1273) , (Firm B,831) , (Firm C,58) , (Firm D,1685) , (Firm E,339) , (Firm F,54) , (Firm G,2318) , (Firm H,855) , (Firm I ,10) , (Firm J,2851) , (Firm K,3396) , (Firm L,307) , (Firm Remaining,78) .

Calculate the four firm concentration ratio for the market?

Is this market oligopolistic?

Answer 1

Four firm concentration ratio = Four largest sales by the firms in the industry / Total industry sales

Firms with largest Sales: Firm K, Firm J, Firm G, and Firm D

Four Firm Concentration Ratio = $ (3396 + 2851 + 2318 + 1685)/ $(1273 + 831 + 58 + 1685 + 339 + 54 + 2318 + 855 + 10 + 2851 + 3396 + 307 + 78)

Four Firm Concentration Ratio = $ 10250 / $14055

Four Firm Concentration Ratio = 0.73 or 73%

Concentration Levels

High 80% to 100%

Medium 50% to 80%

Low 0% to 50%

Medium Consideration: The market having concentration ratio of 50 to 80 percent is considered an industry with medium concentration and ratio of over 60% is considered as a highly oligopolistic market.

Thus, this market is also oligopolistic market having a concentration ratio of 73%.