-The cookie industry in Eatsweetland consists of 15 firms. The industry sales are $80 million per month. The sales of the largest 5 firms are shown in the table below. The rest 10 firms have sales of $3 million each. What is the Herfindahl-Hirschman index in the market for cookies in Eatsweetland?

Question

Quizplus · Accepted Answer

The Herfindahl-Hirschman index (HHI) is a measure of market concentration. It is calculated by summing the squares of the market shares of all the firms in the market. In this case, the market share of the largest 5 firms is:Firm 1: 20%Firm 2: 15%Firm 3: 12%Firm 4: 10%Firm 5: 8%The market share of the remaining 10 firms is:10 firms x $3 million / $80 million = 37.5%The HHI is then calculated as:HHI = (20^2 + 15^2 + 12^2 + 10^2 + 8^2 + 37.5^2) = 1013Therefore, the correct answer is A) 1013.

-The Cookie Industry in Eatsweetland Consists of 15 Firms