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Chapter 26: Q.14 (page 599)

Suppose that a company based in Dallas, Texas, confronts only four other rival firms. Its own market share is 35 percent, which ties it with the other largest producer and seller in the industry. The other three firms each have a 10 percent market share. What is the four-firm concentration ratio for this industry?

Short Answer

Expert verified

the four-firm concentration ratio for this industry is65%

Step by step solution

01

Given Information

Four-firm Concentration Ratio is the proportion of the consolidated market portions of the four biggest firms to the entire market size determined by adding the market portions of the four biggest firms.

02

Explanation 

The bigger company has the largest share of 35%

The other three firms each have a 10%market share.

Hence the four-firm concentration ratio for this industry is35+10+10+10=65%

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Most popular questions from this chapter

Characterize each of the following as a positive-sum game, a zero-sum game, or a negative-sum game.

a. Office workers contributeS10each to a pool of funds, and whoever best predicts the winners in a professional sports playoff wins the entire sum.

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Suppose that a firm located in Cleveland, Ohio, has entered the same industry as the Dallas company discussed in Problem 26-14. The new firm captures a 5 percent market share, and the market share of one of the smallest three original incumbents declines to 5 percent as well. After the Cleveland firm's entry into the industry, what are the values of the four-firm concentration ratio and of the Herfindahl-Hirschman index?

If a dominant firm cannot maintain a cost advantage over other fringe firms in the industry, why might we anticipate that eventually its "dominance" might disappear? (Hint: What would happen to the number of fringe producers if the dominant firm were to earn economic profits and then what would happen over time to the dominant firm's profits?

Consider the following list, and classify each item according to the appropriate type of two-sided market-audience-making, matchmaking, shared input, or transaction-based-and write a one sentence answer justifying your classification. (Hint: You may wish to check out the firms' Web sites to assist in answering this question.)

a. Realtor.com

b. NYTimes.com

c. Linux.com

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