If there are five firms in an industry, each with a market share of 20 percent, the Herfindahl-Hirschman Index (HHI) of concentration is
A) 2000.
B) 400.
C) 100.
D) 20.

Question

Quizplus · Accepted Answer

The Herfindahl-Hirschman Index (HHI) is calculated by summing the squares of the market shares of all firms in the industry. In this case, each firm has a market share of 20%, so the HHI is 5*(20^2) = 5*400 = 2000.

If There Are Five Firms in an Industry, Each with a Market