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The correct answer is A. The four-firm concentration ratio of 60% means that the largest four firms account for th highest percent sales. These firms have market domination.
Four-firm concentration ratio
The market shares of the biggest companies in the industry are used to determine the four-firm concentration ratio. A four-firm concentration ratio of 60 percent, which means that the four largest firms produce 60% of the industry's output, is a strong marker of oligopoly and that these four companies have significant market domination.
Concentration ratios, particularly the four-firm concentration ratio, are intended to assess the degree of market domination and industry concentration.
One of two almost identical methods can be used to calculate concentration ratios. The first step is to add up the total sales of the top four companies in the sector and then divide by the sum. As an alternative, the market shares of the top four companies might be determined separately and then added.
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