In the U.S. medical device manufacturing sector, the recent market shares of the largest firms are as follows: Medtronic PLC (40.2%), General Electric Company (20%), Abbott Laboratories (9.8%), Johnson and Johnson (5.5%), and Boston Scientific Corporation (4.5%), with all other companies having a combined share of 20.0%. Based on this information, what is true about this sector?

a. The C4 ratio is 80%

b. The C4 ratio is 75.5%

c. The C4 ratio is 40.2%

d. The HHI is about 2562

• The correct answer is b. The C4 ratio is 75.5%.

The C4 ratio is the calculation of the concentration ratio of the 4 most dominant firms in the industry. There are two ways to calculate this metric. The first one is to sum the sales of the four most dominant firms and then divide it by the total sales of the industry. The second method is to sum the market share of the four most dominant firms. In the example given above, the only method that can be used is the sum of the market share. Based on this, the correct answer is option b (40.2%+20%+9.8%+5.5%=75.5%).

Options a. and c. are incorrect because the C4 ratios presented in these options are not the sum of the market share of the 4 most dominant firms. Option d. is also incorrect because we cannot compute the HHI without having the total number of firms in the industry.