One advantage of the Herfindahl index over the concentration ratio is that it:
A) takes into account only the leading firms in an industry.
B) gives extra weight to firms that are especially large.
C) tells about only the top 50 firms in an industry.
D) is easier to calculate.

Question

Quizplus · Accepted Answer

The Herfindahl index gives extra weight to larger firms by squaring the market share of each firm, thus reflecting the size distribution of firms more accurately than the concentration ratio.

One Advantage of the Herfindahl Index Over the Concentration Ratio