There are ten firms in an industry. Five of the firms each have a market share of 13 percent and five of the firms each have a market share of 7 percent. The Herfindahl index is

Question

Quizplus · Accepted Answer

First, we need to calculate the market share of each firm by multiplying the market share percentage by 100 (so we can work with integers):
- 5 firms have a market share of 13 percent each: 5 x 13 = 65
- 5 firms have a market share of 7 percent each: 5 x 7 = 35

Then, we can calculate the squared market share of each firm:
- For the firms with a 13 percent market share: (13^2) x 5 = 845
- For the firms with a 7 percent market share: (7^2) x 5 = 245

Finally, we add up these squared market shares to get the Herfindahl index:
845 + 245 = 1,090

Therefore, the answer is B.

There Are Ten Firms in an Industry