If an industry consists of only four firms with equal market shares, then the Herfindahl index
A)is 25
B)is 10, 000
C)is 100
D)is 2, 500
E)cannot be calculated without additional information

Question

Quizplus · Accepted Answer

The Herfindahl index is calculated by summing the squares of the market shares of all firms in the industry. If there are four firms with equal market shares, each firm has a 25% share. The Herfindahl index is (25^2) + (25^2) + (25^2) + (25^2) = 625 + 625 + 625 + 625 = 2,500.

If an Industry Consists of Only Four Firms with Equal