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    Firm Concentration Ratio & Merging

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    There are six firms in the industry. Suppose their sales in the year 2006 are as

    Firm Sales (10 millions of dollars)
    A 100
    B 80
    C 50
    D 40
    E 40
    F 20

    1. What is the concentration ratio in the industry
    (a) if you use the four-firm concentration ratio;
    (b) if you use the HHI index.

    2. Would you regard this industry as oligopolistic? Why or why not?

    3. Suppose that firm A merges with firm F. What now will be the concentration ratio in the industry?

    4. Suppose that after they merge, firms A and F go out of business. What now will be the concentration ratio in this industry?

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    Solution Preview

    The concentration ratio of an industry is used as an indicator of the relative size of firms in relation to the industry as a whole. Here we have a total industry worth 330 million. The top four firms control 270 million, which is 82%. ...

    Solution Summary

    Determination of market structure based on concentration ratios and mergers in the solution.