Asked by Monisa Siddiqi on Jun 07, 2024
Verified
If you sum the squares of the market shares of each firm in an industry (as measured by percent of industry sales) ,you are calculating the:
A) four-firm concentration ratio.
B) Herfindahl index.
C) degree of collusion.
D) Lerner index.
Herfindahl Index
A measure of market concentration, calculated by summing the squares of the market shares of all participants in the market.
Market Shares
The portion of a market controlled by a particular company or product, typically expressed as a percentage of the total market.
Four-Firm Concentration Ratio
An economic measure that assesses the concentration of business within an industry, represented by the combined market share of the four largest firms.
- Understand the importance of the Herfindahl index as a tool for assessing market concentration and its impact on competitive dynamics.
Verified Answer
KN
Katherine Nistal SayagoJun 13, 2024
Final Answer :
B
Explanation :
Summing the squares of each firm's market share is a calculation used to determine the Herfindahl index, which measures the concentration of an industry.
Learning Objectives
- Understand the importance of the Herfindahl index as a tool for assessing market concentration and its impact on competitive dynamics.