The correct ranking of the four basic market structures from low HHI (Herfindahl-Hirschman Index)to high HHI is
A)monopolistic competition,perfect competition,oligopoly,monopoly.
B)perfect competition,oligopoly,monopolistic competition,monopoly.
C)monopoly,oligopoly,monopolistic competition,perfect competition.
D)perfect competition,monopolistic competition,oligopoly,monopoly.
E)monopoly,monopolistic competition,oligopoly,perfect competition.

Question

Quizplus · Accepted Answer

The HHI measures market concentration, with higher values indicating a less competitive market. Perfect competition has the lowest HHI since there are numerous small firms with equal market shares. Monopolistic competition has a higher HHI since there are still a significant number of firms but with some product differentiation. Oligopoly has an even higher HHI since there are fewer dominant firms controlling a significant share of the market. Lastly, monopoly has the highest HHI since there is only one firm controlling the entire market. Therefore, the correct ranking of the four basic market structures from low HHI to high HHI is perfect competition, monopolistic competition, oligopoly, and monopoly.

The Correct Ranking of the Four Basic Market Structures from Low