Suppose there are 51 firms in a market. The largest firm has sales of $50 million and each of the other firms has sales of $1 million. The Herfindahl-Hirshman Index of this industry is
A) 2,500.
B) 2,501.
C) 2,550.
D)50

Question

Quizplus · Accepted Answer

The formula for calculating the Herfindahl-Hirshman Index (HHI) is the sum of the squared market shares of all firms in the industry.

The market share for the largest firm is 50/101 = 49.5%, and for each of the other firms is 1/101 = 0.99%.

HHI = (49.5%)^2 + 50*(0.99%)^2 = 2,550.

Therefore, the correct answer is C) 2,550.

Suppose There Are 51 Firms in a Market