In Industry A, the largest four firms together have a 30 percent share of the market and there are a total of eight firms in the market. In Industry B, the largest four firms together have a 30 percent share of the market and there are 100 other firms in the market. If we want to distinguish between the concentration in these two industries, the best measure to use is the

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The Herfindahl index is the best measure to use in distinguishing between the concentration in these two industries. It takes into account the market share of all firms in the industry, not just the largest four, giving a more complete picture of market concentration. The four-firm concentration ratio is not sufficient for comparing markets with a different number of total firms, and the horizontal- and vertical-merger indices are not relevant in this scenario.

In Industry A, the Largest Four Firms Together Have a 30