There are five firms in the cresset industry.The market shares of the five firms are 60 percent, 15 percent, 15 percent, 6 percent, and 4 percent.The Herfindahl index is

Question

Quizplus · Accepted Answer

The formula for calculating the Herfindahl index is the sum of the squared market shares of each firm in the industry.

So, the calculation for this industry would be:
(0.6)^2 + (0.15)^2 + (0.15)^2 + (0.06)^2 + (0.04)^2 = 0.36 + 0.0225 + 0.0225 + 0.0036 + 0.0016 = 0.4052

Then, the result is multiplied by 10,000:
0.4052 x 10,000 = 4,052

So, the Herfindahl index for this industry is 4,052, which corresponds to answer choice D.

There Are Five Firms in the Cresset Industry