The sum of the squared values of market shares of firms in an industry is referred to as the
A) concentration ratio.
B) Herfindahl index.
C) variance value.
D) antitrust index.

Question

Quizplus · Accepted Answer

The Herfindahl index measures the concentration of market power among firms in an industry by summing the squares of their market shares. The higher the Herfindahl index, the more concentrated the industry is, and therefore the fewer firms there are that dominate the market. The other answer choices (A, C, and D) are either incorrect or unrelated to the measurement of market concentration.

The Sum of the Squared Values of Market Shares of Firms