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WHAT IS CONCENTRATION RATIO?
WHAT IS CONCENTRATION RATIO?
Expert Solution
The concentration ratio is calculated as the sum of the market share percentage held by the largest specified number of firms in an industry. The concentration ratio ranges from 0% to 100%, and an industry's concentration ratio indicates the degree of competition in the industry.
A concentration ratio is the ratio of the combined market shares of a given number of firms to the whole market size. It is using the ratio in the firm of 3,4,5 which is highly likable at business Concentration ratios are used to assess the extent to which a given market is oligopolistic.
Concentration ratios tend to feature on economic research and reports, and are displayed as an equation. The number of companies being taken into account in the concentration ratio is displayed in superscript next to the letters CR. The most common ratios are CR4 and CR8, indicating comparative output of the four and eight biggest firms in a sector compared to the rest respectively. CR1, on the other hand, is the comparative size of the single biggest firm in an industry.
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