Exhibit 26-2

-Refer to Exhibit 26-2.The industry's Herfindahl index in Year 4 was

Question

Exhibit 26-2
 
-Refer to Exhibit 26-2.The industry's Herfindahl index in Year 4 was

Quizplus · Accepted Answer

The Herfindahl index is calculated by summing the squares of the market share of each firm in the industry. In Year 4, there are 10 firms in the industry, so we need to square and sum their market shares as follows:

(0.1)^2 + (0.1)^2 + (0.15)^2 + (0.15)^2 + (0.1)^2 + (0.1)^2 + (0.05)^2 + (0.05)^2 + (0.1)^2 + (0.1)^2 = 0.0215

Multiplying this result by 10,000 gives us an industry Herfindahl index of 215. Therefore, the correct answer is C) 2,150.

Exhibit 26-2 -Refer to Exhibit 26-2.The Industry's Herfindahl Index in Year 4