NISM Certifications · NISM-Series-XV: Research Analyst · Industry Analysis
The four largest firms in an industry have market shares of 30%, 25%, 20% and 10%, and the remaining firms share the rest. What is the four-firm concentration ratio and what does it suggest?
The four-firm concentration ratio is 85% (30+25+20+10), which shows a highly concentrated, oligopolistic industry where a few firms dominate. The 15% figure is only the share of the remaining firms, so it does not represent concentration.
- A85%, indicating a highly concentrated oligopolistic industryCorrect
- B85%, indicating a highly fragmented industry
- C15%, indicating a highly concentrated industry
- D65%, indicating perfect competition
Explanation
The four-firm concentration ratio is the sum of the top four shares: 30+25+20+10 = 85%. A value this high shows that a few firms dominate, which is an oligopolistic structure. The 15% option is just the share of all other firms, not the ratio.
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