A concentration ratio is the percentage of the total market controlled by a certain number of firms and is measured by total sales. The four-firm concentration ratio is the percentage of all sales in a market that is make up of the four largest firms in that market. The higher the concentration ratio, the less competitive the market since higher ratios mean that fewer firms have significant control of the market. For example, if there are four firms that each control 25% of the market, the four-firm concentration ratio is 100%. If, on the other hand, the market has 100 firms, each of which controls 1% of the market, the four-firm concentration ratio would be 4%.

In general, if the concentration ratio is greater than 60%, the market would be considered an oligopoly. The only exception is if the market is a monopoly, in which case there is only one firm and the concentration ratio would be 100%. Since the four-firm concentration ratio here is 80%, this market would be classified as an oligopoly since the four largest firms make up 80% of all sales in the market.