The Herfindahl-Hirschman Index is
A) calculated by summing the squared market share percentages for all firms in the industry.
B) calculated as the sum of the market shares of the top four firms.
C) calculated as the sum of the market shares for all firms in the industry.
D) not used by the government in considering mergers.

Question

Quizplus · Accepted Answer

The Herfindahl-Hirschman Index (HHI) is calculated by summing the squares of the market share percentages of all firms in the industry, making choice A correct. It is a measure of market concentration and is used to assess the potential for market power.

The Herfindahl-Hirschman Index Is