Let's determine the four-firm concentration ratio for this industry step-by-step. The four-firm concentration ratio is a measure used to assess the extent of market share held by the four largest firms in an industry. It is calculated by summing the market shares of the four firms with the highest market shares. Here's how we would go about calculating it using the provided data:
1. List the market shares of all firms:
- Firm A: 40%
- Firm B: 30%
- Firm C: 20%
- Firm D: 5%
- Firm E: 5%
2. Sort the firms based on their market shares in descending order:
- 40% (Firm A)
- 30% (Firm B)
- 20% (Firm C)
- 5% (Firm D)
- 5% (Firm E)
3. Identify the market shares of the four largest firms:
- The four largest market shares are 40%, 30%, 20%, and one of the 5% shares.
4. Sum the market shares of the four largest firms:
- 40% (Firm A)
- 30% (Firm B)
- 20% (Firm C)
- 5% (Firm D or E)
Therefore, the total is:
[tex]\[
40\% + 30\% + 20\% + 5\% = 95\%
\][/tex]
The four-firm concentration ratio for this industry is 95 percent.
So, the correct option is:
- 95 percent.
