Industries X and Y both have four-firm concentration ratios of 16 percent, but the Herfindahl index for X is 102, while that for Y is 95. These data suggest
A)greater market power in Y than in X.
B)greater market power in X than in Y.
C)both industries are strongly oligopolistic.
D)that price competition is stronger in X than in Y.

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 concentration of market power. Therefore, with a Herfindahl index of 102 for industry X compared to 95 for industry Y, industry X has greater market power.

Industries X and Y Both Have Four-Firm Concentration Ratios of 16