If an industry is composed of four firms and their market shares are 40 percent, 30 percent, 20 percent, and 10 percent, then the Herfindahl index for the industry is
A) 100.
B) 200.
C) 3,000.
D) 10,000.

Question

Quizplus · Accepted Answer

The Herfindahl index 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 $40^2 + 30^2 + 20^2 + 10^2 = 1600 + 900 + 400 + 100 = 3000$.

If an Industry Is Composed of Four Firms and Their