In a national cement manufacturing industry, seven operating firms account for the entire … — JAMB UTME

In a national cement manufacturing industry, seven operating firms account for the entire market sales. Their annual revenue figures (in millions of Naira) are: Firm A: $\text{N}350$ , Firm B: $\text{N}250$ , Firm C: $\text{N}150$ , Firm D: $\text{N}100$ , Firm E: $\text{N}80$ , Firm F: $\text{N}40$ , and Firm G: $\text{N}30$ . What is the four-firm concentration ratio ( $\text{CR}_4$ ) for this industry, expressed as a percentage?

Answer: 85 %

Answer

The four-firm concentration ratio (CR4) for the industry is 85%.

The four-firm concentration ratio (CR4) measures market dominance by taking the sum of market shares (or revenues) of the four largest firms and expressing it as a percentage of total industry sales. Here, total revenue is

\text{N}1,000\text{ million}

and the top four firms contribute

\text{N}850\text{ million}

, yielding

85\%

, which indicates a highly concentrated oligopolistic market.

Step-by-Step Solution

Calculate the total industry revenue

Total Industry Revenue = N1,000 million

The total market size is needed as the denominator to determine the market share proportion.

Identify and sum the revenues of the four largest firms

Combined Revenue of Top 4 = N850 million

The four-firm concentration ratio measures the percentage of total industry output controlled by the four largest firms.

Calculate the CR4 percentage

CR4 = 85%

CR4 is calculated as (Combined Top 4 Revenue / Total Industry Revenue) * 100.

Key Concept

Four-Firm Concentration Ratio (CR4)

Estimated Time:1m 30s

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