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2 June, 19:11

Suppose that there are two industries, A and B. There are five firms in industry A with sales at $5 million, $2 million, $1 million, $1 million, and $1 million, respectively. There are four firms in industry B with equal sales of $2.5 million for each firm. The four-firm concentration ratio for industry B is:

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  1. 2 June, 20:21
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    The four-firm concentration ratio for industry B is 1.00

    Explanation:

    Concentration ratio: It is a ratio which shows a relationship of total sales of each firm with the total industry sales

    In mathematically,

    Concentration ratio = (Total sales of each firm) : (total industry sales)

    where,

    Total sales of each firm = $2.5 million + $2.5 million + $2.5 million + $2.5 million = $10.00 million

    And, the industry sales = $5 million + $2 million + $1 million + $1 million + $1 million = $10.00 million

    Now put these values to the above formula

    So, the ratio would equal to

    = $10 million : $10 million

    = 1.00
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