Final answer:
The proportion of the market captured by a firm is its market share, with the four-firm concentration ratio and Herfindahl-Hirschman Index (HHI) being two common measures used to assess market competition and concentration.
Step-by-step explanation:
The proportion of the market that a firm captures is known as its market share. This figure is significant as it illustrates a company's competitive position within an industry. Market share is calculated by determining the percentage of total sales in the market that are attributable to a particular firm.
There are several ways to measure market concentration and competition, one of which is the four-firm concentration ratio. This method involves adding together the market shares of the four largest firms within a market. Conversely, the Herfindahl-Hirschman Index (HHI) takes into account the market shares of all firms in the market, which are squared and then summed together, giving more weight to firms with larger market shares.
However, these measures have limitations and are based on the assumption that the market is well-defined and that competition levels are comparable across industries, which is not always accurate. Hence, antitrust regulators are now adopting more nuanced approaches to assess competition and the effects of mergers.