There are ten firms in an industry.Five of the firms each have a market share of 12 percent and five of the firms each have a market share of 8 percent.The Herfindahl index is

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The Herfindahl index is calculated by summing the squares of the market shares of all firms in the industry. For this industry: (5 firms * 12^2) + (5 firms * 8^2) = 5*144 + 5*64 = 720 + 320 = 1040.

There Are Ten Firms in an Industry