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18 October, 03:19

Suppose there are seven firms in a market where the three largest firms supply 20% of the market. The other four firms supply 10% of the market, clearing quantity. What is the firm concentration ratio (i. e., the share of total sales controlled by the five largest firms in the market) ?

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  1. 18 October, 07:17
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    Answer: The firm concentration ratio of the 5 largest companies in the market is 0.8.

    Explanation: we must add the market supply percentage of the 5 largest companies in the market.

    The first 3, 20% each.

    And the next 2, 10% each.

    20% + 20% + 20% + 10% + 10% = 80%

    Percentage of the 5 largest companies / 100 = Concentration ratio.

    80/100 = 0.8.
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