Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 11: Q. 13 (page 272)

How do we measure a four-firm concentration

ratio? What does a high measure mean about the extent of competition?

Short Answer

Expert verified

The concentration of the four largest dominant firms in the industry.

Step by step solution

01

Step1. Concept 

Monopoly power in any market can be measured by various methods. These include four-firm concentration ratio, Hirschman Herfindahl Index, etc.

02

Step2. Explanation, Calculation and Implication 

Four firm concentration ratio is simply the addition of the concentration of the largest four, dominant firms in the industry.

For eg. there are only 6 firms in an industry with the following mentioned concentration:

A- 60%

B- 12%

C- 10%

D- 8%

E- 7%

F- 3%

The four firm concentration ratio is simply the addition of the concentration of firms A, B, C and D; i.e. 0.9 in our example (90%).

Higher the ratio, higher is the monopoly power and lesser is the competition.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Is it true that the four-firm concentration ratio puts more emphasis on one or two very large firms, while the Herfindahl-Hirshman Index puts more emphasis on all the firms in the entire market? Explain briefly.

What is a minimum resale price maintenance agreement? How might it reduce competition and when might it be acceptable?

What is exclusive dealing? How might it reduce competition and when might it be acceptable?

What is the goal of antitrust policies?

What is a corporate merger? What is an acquisition?
See all solutions

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free