Question

The four-firm sales concentration ratio for an industry measures the

Multiple Choice
-geographic concentration of firms
-extent to which the four largest firms dominate the production of a good.
-percentage of the industry's capital facilities owned by the four largest firms
-degree of X-inefficiency in the industry.

Answer 1

A four-firm concentration ratio measures the extent of dominance by the top four firms in an industry, providing insights into market competition and potential inefficiencies.

Step-by-step explanation:

A four-firm concentration ratio is a measure that indicates the extent to which the four largest firms dominate the production of a good in an industry. It calculates the combined market share of these firms as a percentage of total industry sales. This ratio helps regulators assess the degree of monopoly power in an industry.

For example, if the four-firm concentration ratio is high, it suggests that the industry is highly concentrated and dominated by a few large firms. On the other hand, a low ratio indicates a more competitive industry with a larger number of smaller firms.

The four-firm concentration ratio is a valuable tool in understanding market competition and determining potential inefficiencies caused by high market concentration.