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Concentration Ratio

Summarises how much of the entire market the largest firms control.

Below is an illustration of how to calculate a specific n-firm ratio. In this case to find the 3-firm concentration ratio (the combined market share of the three largest firms) all that is required is to identify the three firms with highest market share and add these sums together as shown. The fact that the ratio is 77%, signifies that this is not a very comeptitive market as these three firms control over three quarters of the market.

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