Question 1
Multiple ChoiceSix firms in a market have the following market shares:
Company | X | Y | Z | P | Q | R |
|---|---|---|---|---|---|---|
Market Share (%) | 28 | 26 | 18 | 10 | 9 | 9 |
If companies P and R merge to form a new company S, what is the three-firm concentration ratio after the merger?
Explanation
To calculate the three-firm concentration ratio, we sum the market shares of the three largest firms after the merger. The merged company S (P + R) has a market share of 10% + 9% = 19%, but it does not surpass the third-largest existing company, Z (18%).
The top three firms by market share remain:
X: 28%
Y: 26%
Z: 18%
Three-firm concentration ratio = 28% + 26% + 18% = 72%
So, even after the merger, the top three companies remain unchanged, and the correct concentration ratio is 72%.