Asked by Darby Fischer on May 28, 2024
Verified
To calculate the Herfindahl-Hirschman index (HHI) ,one must _____ market share(s) of _____ in the industry.
A) sum the;the four largest firms
B) sum the;all of the firms
C) divide the;the largest firm by the sum of the four largest firms
D) sum the squared;all of the firms
Herfindahl-Hirschman Index
A measure of market concentration that is calculated by squaring the market share of each firm competing in the market and then summing the resulting numbers.
Squared Market Shares
A measure used in the analysis of market concentration, calculating each firm's market share squared and summing them to assess competitive environments.
Industry
An industry is a group of companies that operate in a specific sector of the economy, often producing similar goods or services.
- Explain and compute the Herfindahl-Hirschman Index (HHI) along with its relevance for analyzing market concentration.
Verified Answer
ZK
Zybrea KnightJun 03, 2024
Final Answer :
D
Explanation :
The Herfindahl-Hirschman index (HHI) is calculated by summing the squares of the market shares of all the firms in the industry. This method accounts for both the size of firms and the distribution of market shares among them, providing a measure of market concentration.
Learning Objectives
- Explain and compute the Herfindahl-Hirschman Index (HHI) along with its relevance for analyzing market concentration.