Question

Suppose an industry is made up of 25 firms, all with equal market share. The four-firm concentration ratio of this industry is?

1) 16
2) 20
3) 25
4) It cannot be determined from the information given.

Answer 1

The four-firm concentration ratio is 16% when all 25 firms in an industry have equal market share.

Step-by-step explanation:

The four-firm concentration ratio measures the total market share of the four largest firms in an industry. In this case, if all 25 firms in the industry have an equal market share, the concentration ratio would be determined by adding the market shares of the four largest firms. Since all firms have equal market share, the concentration ratio would be: 1/25 + 1/25 + 1/25 + 1/25 = 4/25 = 16%.

Therefore, the correct answer is 1) 16.