What would the Herfindahl-Hirschman Index equal for an industry consisting of six firms with market shares of 40%, 30%, 20%, 5%, 3%, and 2%?
A)0.95
B)2.934
C)2,938
D)10,000

Question

What would the Herfindahl-Hirschman Index equal for an industry consisting of six firms with market shares of 40%, 30%, 20%, 5%, 3%, and 2%?
A)0.95 
B)2.934 
C)2,938 
D)10,000

Quizplus · Accepted Answer

The Herfindahl-Hirschman Index (HHI) is calculated by summing the squares of the market shares of all firms in the industry. For this industry: HHI = 40^2 + 30^2 + 20^2 + 5^2 + 3^2 + 2^2 = 1600 + 900 + 400 + 25 + 9 + 4 = 2938.

What Would the Herfindahl-Hirschman Index Equal for an Industry Consisting