Suppose the market for good X has a four-firm concentration ratio of 0.50. Furthermore, assume that total sales in the industry are $1.2 million. Based on this information we know that sales for the largest four firms in the industry equals (in aggregate)
A. $600,000
B. $60,000
C. $2,400,000
D. $240,000
Do a little research, then take a shot, what do you think.
600,000
To determine the sales for the largest four firms in the industry, we need to calculate the total sales that account for 50% of the market.
First, we need to understand what the four-firm concentration ratio represents. The four-firm concentration ratio is a measure of the total market share held by the four largest companies in an industry. It is calculated by summing the sales of the four largest firms and dividing it by the total sales in the industry.
In this case, the four-firm concentration ratio is 0.50, which means that the four largest firms control 50% of the market.
Next, we can calculate the sales for the largest four firms by multiplying the four-firm concentration ratio by the total sales in the industry.
Sales for the largest four firms = Four-firm concentration ratio * Total sales in the industry
Sales for the largest four firms = 0.50 * $1.2 million
Sales for the largest four firms = $600,000
Therefore, the correct answer is option A. $600,000.