Industry Y is dominated by five large firms that hold market shares of 20, 20, 25, 25, and 10. The Herfindahl index for this industry is

A) 1,560.
B) 2,150.
C) 2,340.
D) 3,500.

Question

Industry Y is dominated by five large firms that hold market shares of 20, 20, 25, 25, and 10. The Herfindahl index for this industry isA) 1,560.B) 2,150.C) 2,340.D) 3,500.

bryan avila · Accepted Answer

Final Answer : B, Explanation :   The Herfindahl index is calculated by squaring the market share of each firm competing in the market and then summing the resulting numbers. For the given industry, the calculation would be as follows:   2 0 2 + 2 0 2 + 2 5 2 + 2 5 2 + 1 0 2 = 400 + 400 + 625 + 625 + 100 = 2 , 150. 20^2 + 20^2 + 25^2 + 25^2 + 10^2 = 400 + 400 + 625 + 625 + 100 = 2,150. 2 0 2 + 2 0 2 + 2 5 2 + 2 5 2 + 1 0 2 = 400 + 400 + 625 + 625 + 100 = 2 , 150.

Industry Y is dominated by five large firms that hold market shares of 20, 20, 25, 25, and 10. The Herfindahl index for this industry is

A) 1,560.
B) 2,150.
C) 2,340.
D) 3,500.

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