Economics of Social Issues 20th Edition by Ansel Sharp, Charles Register , Paul Grimes

Exercise 4

Suppose two industries exist, A and B, both of which have concentration ratios of 80 percent. In A, the four largest firms control the following shares of the market, respectively: 60 percent, 10 percent, 7 percent, and 3 percent. In B, the four largest each have a 20 percent share of the market. In which would you expect more potential for monopoly power? What does this say about using concentration ratios as a measure of the potential for monopoly power?