Table 1 shows monthly data for three firms selling broadband packages in one city during 2022. Total market revenue is $10.0 million in each month. Firm Jan...
Question 1 Report
Table 1 shows monthly data for three firms selling broadband packages in one city during 2022. Total market revenue is $10.0 million in each month.
| Firm | January revenue ($ million) | June revenue ($ million) |
|---|---|---|
| NetWay | 4.8 | 4.1 |
| UrbanCable | 3.1 | 3.0 |
| FastHome | 1.4 | 1.8 |
| All other firms | 0.7 | 1.1 |
(a) Calculate NetWay's market share in June. [2]
(b) Show the three-firm concentration ratio in June. [2]
(c) Explain one reason why NetWay may be concerned by the figures. [2]
Answer Details
(a) Market share is a firm's revenue as a percentage of total market revenue:
\[\frac{4.1}{10.0}\times100=41\%\]
NetWay's market share in June is 41%. [2]
(b) First add the revenue of the three largest firms:
\[4.1+3.0+1.8=8.9\text{ million dollars}\]
Then calculate this as a percentage of total market revenue:
\[\frac{8.9}{10.0}\times100=89\%\]
The three-firm concentration ratio in June is 89%. [2]
(c) NetWay's share fell from 48% in January, \(\frac{4.8}{10.0}\times100\), to 41% in June. [1] This suggests rivals are becoming stronger, which may reduce NetWay's revenue or market power. [1]
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