One advantage of the Herfindahl index over the concentration ratio is that the:
A) Herfindahl index ignores the small firms that always exist on the fringes of any industry.
B) Herfindahl index is easier to compute.
C) Herfindahl index takes into account all firms in an industry.
D) concentration ratio excludes the largest firms in an industry.

Question

Quizplus · Accepted Answer

The Herfindahl index considers the market shares of all firms in an industry, providing a more comprehensive measure of market concentration compared to the concentration ratio, which typically only considers the largest firms.

One Advantage of the Herfindahl Index Over the Concentration Ratio