If there are eight firms in a market and each has an equal market share, the Herfindahl- Hirschman Index (HHI)is and the market is_____considered to be ______ .
A)1,250; competitive
B)1,250; moderately competitive
C)2,800; competitive
D)2,800; moderately competitive

Question

Quizplus · Accepted Answer

The HHI is calculated by summing the squares of the market shares of each firm in the market. In this case, each firm has an equal market share of 1/8, so the HHI is 8*(1/8)^2 = 1,250. An HHI below 1,500 indicates a competitive market.

If There Are Eight Firms in a Market and Each