Asked by Samantha Matias on Jun 09, 2024
Verified
Two industries that have the same four-firm concentration ratio can have significantly different Herfindahl indexes.
Herfindahl Index
A measure of market concentration that squares and sums the market share percentages of all firms within an industry.
Four-Firm Concentration Ratio
The four-firm concentration ratio is a measure used to assess the competitiveness of a market by calculating the combined market share of the four largest firms within an industry.
- Acquire knowledge about diverse market forms, including monopoly, oligopoly, monopolistic competition, and complete competition.
- Appreciate the role of the Herfindahl index in assessing the degree of concentration within a market.
Verified Answer
JN
Jaiveonna NorrisJun 16, 2024
Final Answer :
True
Explanation :
The concentration ratio only measures the market share of the top four firms in an industry, while the Herfindahl index takes into account the market share of all firms in the industry. Therefore, industries with different numbers of firms and varying degrees of market concentration can still have the same four-firm concentration ratio but different Herfindahl indexes.
Learning Objectives
- Acquire knowledge about diverse market forms, including monopoly, oligopoly, monopolistic competition, and complete competition.
- Appreciate the role of the Herfindahl index in assessing the degree of concentration within a market.
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