Question

If the 4 firm concentration is 35%,what can you say about the industry?

Answer 1

Four firm concentration ratio is an economic measure of market competition and market power. It is the sum of the market share of top 4 firms operating in a given market. Ratio of more than 50% indicates moderately concentrated market which means there can be oligopoly. a value of more than 80% indicates highly concentrated market and possible chances of monopoly. However when the ratio is less than 50% it means the market concentration is very low and there can be perfect competition or monopolistic competition.

Therefore in this case the ratio is less than 50%, which shows perfectly competitive or monopolistically competitive market.