Final answer:
An industry's four-firm concentration ratio of 30 percent means the top four firms account for 30% of the market share. While this provides some insight into market structure, tools like the Herfindahl-Hirschman Index offer a deeper analysis of market concentration.
Step-by-step explanation:
An industry with a four-firm concentration ratio of 30 percent indicates that the four largest firms in the industry have a combined market share of 30%. This metric helps regulators understand the level of market concentration and potential monopoly power within an industry. However, this ratio is only a simple indicator of market structure and might not fully describe the competition landscape.
The use of alternative measures like the Herfindahl-Hirschman Index (HHI) can provide a more nuanced view of market concentration. The HHI not only takes into account the size of the companies but also how evenly the market share is distributed among them. An industry where a few firms have nearly equal shares will have a lower HHI compared to one where a single firm dominates, even if they both have the same four-firm concentration ratio.