activities. In the twenty-first century, the FTC and the U.S. Department of Justice continue to enforce antitrust laws.

The Four-Firm Concentration Ratio

Regulators have struggled for decades to measure the degree of monopoly power in an industry. An early tool

was the concentration ratio, which measures the combined market share (or percent of total industry sales)

which is accounted for by the largest firms (typically the top four to eight). For an explanation of how high

market concentrations can create inefficiencies in an economy, refer to Monopoly.

Say that the market for replacing broken automobile windshields in a certain city has 18 firms with the market

shares in Table 11.1, where the market share is each firm’s proportion of total sales in that market. We

calculate the four-firm concentration ratio by adding the market shares of the four largest firms: in this case,
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