Asked by Bailey Glover on Jul 08, 2024
Verified
Which statement is true?
A) Industry X has a Herfindahl-Hirschman Index of 2400.
B) Industry X has an H-H-I of 100.
C) Industry X has an H-H-I of 80.
D) Industry X has an H-H-I of 1,000.
Herfindahl-Hirschman Index
A benchmark for gauging how concentrated a market is to identify the level of competitive forces within a sector.
- Acquire knowledge on the formulation and analysis of the Herfindahl-Hirschman Index (HHI) in assessing market concentration.
- Outline the distinctions between employing concentration ratios and the HHI for the evaluation of market concentration.
Verified Answer
BR
Brianna roblesJul 12, 2024
Final Answer :
A
Explanation :
The Herfindahl-Hirschman Index (HHI) is calculated by squaring the market share of each firm competing in the market and then summing the resulting numbers. For Industry X: HHI=0.402+0.202+0.102+0.102+0.102+0.102=0.16+0.04+0.01+0.01+0.01+0.01=0.24HHI = 0.40^2 + 0.20^2 + 0.10^2 + 0.10^2 + 0.10^2 + 0.10^2 = 0.16 + 0.04 + 0.01 + 0.01 + 0.01 + 0.01 = 0.24HHI=0.402+0.202+0.102+0.102+0.102+0.102=0.16+0.04+0.01+0.01+0.01+0.01=0.24 or 2400 when expressed as per the usual convention (multiplying by 10,000).
Learning Objectives
- Acquire knowledge on the formulation and analysis of the Herfindahl-Hirschman Index (HHI) in assessing market concentration.
- Outline the distinctions between employing concentration ratios and the HHI for the evaluation of market concentration.