Answer the following questions, which relate to measures of concentration:
a. What is the meaning of a four-firm concentration ratio of 60 percent? 90 percent? What are the shortcomings of concentration ratios as measure of monopoly power?
b. Suppose that the five firms in industry A have annual sales of 30, 30, 20, 10 and 10 percent of total industry sales, For the five firms in industry B the are figures are 60, 25, 5, 5 and 5 percent. Calculate the Herfindahl index for each industry and compare their likely competitiveness.© BrainMass Inc. brainmass.com October 9, 2019, 6:48 pm ad1c9bdddf
a. 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. This ratio reflects the percentage of market output generated by the largest firms in the industry. Thus a four-firm concentration ratio of 60 percent means the largest ...
This solution explains the measures of concentration in 224 words.