Suppose the Herfindahl indexes for industries A, B, and C are 2,200, 2,000, and 1,600, respectively. These data imply
A)that market power is greatest in industry C.
B)that market power is greatest in industry B.
C)that market power is greatest in industry A.
D)nothing about the degree of concentration across the three industries.

Question

Quizplus · Accepted Answer

The Herfindahl index is a measure of the size of firms in relation to the industry and an indicator of the amount of competition among them. A higher Herfindahl index indicates a higher level of concentration and, by implication, greater market power. Therefore, with an index of 2,200, industry A has the greatest market power.

Suppose the Herfindahl Indexes for Industries A, B, and C