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The Difference Between a Concentration Ratio and the Herfindahl-Hirschman Index

Question 15

Multiple Choice

The difference between a concentration ratio and the Herfindahl-Hirschman Index (HHI) as measures of market concentration is that:


A) the concentration ratio captures the degree of monopoly power while the HHI captures the level of advertising for the firms.
B) the concentration ratio places heavier weight on larger firms in the industry.
C) the concentration ratio does not distinguish between an industry with several equal sized firms and an industry with one large dominant firm.
D) the HHI cannot capture the existence of a monopolist.
E) all of the above are true.

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