Asked by Mirales Jumuad on Apr 26, 2024
Verified
Assume six firms comprising an industry have market shares of 30,30,10,10,10,and 10 percent.The Herfindahl index for this industry is:
A) 2,000.
B) 1,600.
C) 2,200.
D) 80.
Herfindahl Index
A gauge of company sizes within their market and a marker for the degree of rivalry between them.
Market Shares
The share of a market dominated by a specific company or product, commonly represented as a percentage of the overall sales within that market.
Industry
It refers to the collection of businesses and operations involved in the production, manufacturing, or distribution of goods and services in a specific sector.
- Gain insight into the significance of concentration ratios and the Herfindahl index for the analysis of market concentration.
Verified Answer
KH
Kallie HoverApr 30, 2024
Final Answer :
C
Explanation :
The Herfindahl index is calculated by summing the squares of the market share percentages of all firms in the industry. For this industry, it would be (30^2) + (30^2) + (10^2) + (10^2) + (10^2) + (10^2) = 900 + 900 + 100 + 100 + 100 + 100 = 2,200.
Learning Objectives
- Gain insight into the significance of concentration ratios and the Herfindahl index for the analysis of market concentration.