Asked by Julian Green on Jul 08, 2024
Verified
The Herfindahl-Hirschman index
A) is no longer applicable to the American economy.
B) measures the degree of concentration within an industry.
C) seldom goes above 100.
D) falls as the degree of concentration rises.
Herfindahl-Hirschman Index
A measure of market concentration to assess the level of competition within an industry.
Degree of Concentration
A measure of the extent to which a small number of firms or entities dominate in a particular market or industry.
American Economy
The economic system of the United States, characterized by a mixed economy with private and public enterprise.
- Comprehend the importance and constraints of concentration ratios and the Herfindahl-Hirschman index when assessing competition within markets.
Verified Answer
HN
Husna NasirJul 14, 2024
Final Answer :
B
Explanation :
The Herfindahl-Hirschman index (HHI) measures the concentration of market power within an industry, making choice B the correct answer. It is calculated by squaring the market share of each firm in the industry and then adding up the resulting numbers. The resulting score falls between zero and 10,000, with a higher score indicating greater market concentration. Therefore, choices A and D are incorrect. Choice C is also incorrect because the HHI can exceed 100, but a score above 2500 is generally considered highly concentrated.
Learning Objectives
- Comprehend the importance and constraints of concentration ratios and the Herfindahl-Hirschman index when assessing competition within markets.