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

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 this industry, the calculation would be: $40^2 + 30^2 + 20^2 + 5^2 + 3^2 + 2^2 = 1600 + 900 + 400 + 25 + 9 + 4 = 2938$.

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