Related to the Economics in Practice on page 306: 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
A) 100.
B) 4,900.
C) 5,400.
D) 8,200.

Question

Quizplus · Accepted Answer

The Herfindahl-Hirschman Index (HHI) is calculated by squaring the market share of each firm competing in the market and then summing the resulting numbers. For National CineMedia (70% market share), Screenvision (20% market share), and the other firm (10% market share), the calculation would be: $70^2 + 20^2 + 10^2 = 4900 + 400 + 100 = 5400$.

Related to the Economics in Practice on Page 306: Almost