Related to the Economics in Practice on page 305: Almost 90 percent of advertisements seen in movie theaters are produced and sold by two firms, National CineMedia and Screenvision. Assume that National CineMedia is responsible for 70 percent of the advertising, Screenvision is responsible for 20 percent of the advertising, and the other 10 percent is produced by one other firm. Based on these numbers, the HHI in this industry would be

Question

Quizplus · Accepted Answer

The Herfindahl-Hirschman Index (HHI) is calculated by summing the squares of the market shares of all firms in the industry. We can calculate the HHI as follows:

HHI = (0.70)^2 + (0.20)^2 + (0.10)^2 = 0.49 + 0.04 + 0.01 = 0.54

Since HHI is expressed in terms of percentages, we multiply by 10,000 to get the final result, which is 5,400. This means that the industry is moderately concentrated, but not highly concentrated. Therefore, the correct answer is C.

Related to the Economics in Practice on Page 305: Almost