This Question 1 pt 12of5010complete This According to the ta

This Question: 1 pt 12of50(10complete) This According to the table at right, if the fourth and fifth largest firms in the industry merge, the four-firm concentration ratio in the industry will be Firm O A. 52.5 percent. OB. 35.8 percent. O C. 69.0 percent Annual Sales $1,000 900 120 75 50 40 D. 82.5 percent. 1,200 1,050 90 75

Solution

Following table shows the market share of the firms in descending order -

Fourth and Fifth largest firms are B and G. If these two firms merge then their combined market share will be (15 + 13.33) 28.33%.

Four-firm concentration ratio is sum total of market share of four largest firms in the industry.

After merger,

Four firm concentration ratio = Market share of firm B&G + Market share of firm H + Market share of firm I + Market share of firm A

Four-firm concentration ratio = 28.33% + 20% + 17.5% + 16.67% = 82.5%

The four-firm concentration ratio in the industry will be 82.5 percent.

The correct answer is the option (D).

Firm	Annual Sales	Market Share (In percent)
H	1,200	20
I	1,050	17.5
A	1,000	16.67
B	900	15
G	800	13.33
L	600	10
C	120	2
J	90	1.5
D	75	1.25
K	75	1.25
E	50	0.8
F	40	0.67
Total	6,000	100