Final answer:
The concentration ratio measures a firm's sales revenue relative to the total sales revenue of all industry firms, indicating the degree of market control or monopoly power.
Step-by-step explanation:
The ratio of a firm's sales revenue to the total sales revenue of all firms in the industry, including the firm itself, is known as the concentration ratio. This is a tool used to measure the degree of monopoly power in an industry by assessing the share of total industry sales accounted for by the largest firms, typically the top four to eight firms. Total revenue is calculated by multiplying the price of the product by the quantity of output sold.
A specific example of this is the four-firm concentration ratio, which represents the percentage of total industry sales made by the four largest firms in the industry. A high concentration ratio indicates a higher level of market control or monopoly power by the largest firms, which can lead to inefficiencies in the economy.