There are three banks in East Panhandle.First National Bank which currently has 40 percent of the deposits in the area,Second State Bank which currently has 30 percent of the deposits,and New State Bank and Trust which also has 30 percent of the deposits.What is the Herfindahl-Hirschman Index for East Panhandle?

Question

Quizplus · Accepted Answer

To calculate the Herfindahl-Hirschman Index (HHI), we need to square the market share percentages of each bank and add them together.

For First National Bank: 0.4^2 = 0.16 
For Second State Bank: 0.3^2 = 0.09 
For New State Bank and Trust: 0.3^2 = 0.09

HHI = 0.16 + 0.09 + 0.09 = 0.34

Then we multiply the result by 10,000 to get the final HHI:

HHI = 0.34 x 10,000 = 3,400

Therefore, the correct answer is (C) 3,400.

There Are Three Banks in East Panhandle