Asked by Brendan Lorenzana on May 10, 2024
Verified
If the market is defined more narrowly to include only a more restricted range of products, then the Herfindahl index will
A) increase.
B) decrease.
C) not be affected.
D) either increase or decrease.
Herfindahl Index
An economic measure of market concentration that sums the squares of the market shares of all firms within the industry.
- Understand the reasoning and mathematical process behind utilizing the Herfindahl Index for determining concentration levels within markets.
Verified Answer
GH
Gamze Hac?ibrahimMay 12, 2024
Final Answer :
A
Explanation :
When the market is defined more narrowly to include only a more restricted range of products, the Herfindahl index, which measures market concentration, will increase. This is because a narrower market definition typically means fewer competitors, leading to higher concentration levels.
Learning Objectives
- Understand the reasoning and mathematical process behind utilizing the Herfindahl Index for determining concentration levels within markets.