Open Question
A summary of the market for trumpet solos is shown below. What is the four-firm concentration ratio?
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12. Monopoly
Four Firm Concentration Ratio
Multiple Choice
Which of the following industries is most likely to have the highest four-firm concentration ratio?
A
Local restaurants
B
Automobile manufacturing
C
Retail grocery stores
D
Hair salons
Verified step by step guidance1
Understand that the four-firm concentration ratio measures the market share held by the four largest firms in an industry, indicating the level of market concentration and competition.
Consider the characteristics of each industry: Local restaurants and hair salons are typically numerous and fragmented, with many small competitors, leading to a low concentration ratio.
Retail grocery stores have some large chains but also many smaller stores, so the concentration ratio is moderate but not extremely high.
Automobile manufacturing is dominated by a few large firms that control a significant portion of the market, resulting in a high four-firm concentration ratio.
Therefore, by comparing the market structures, identify automobile manufacturing as the industry most likely to have the highest four-firm concentration ratio.
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