The Herfindahl index for a pure monopolist is
A) 100.
B) 10,000.
C) 100,000.
D) 10.

Question

Quizplus · Accepted Answer

The Herfindahl index for a pure monopolist is equal to the square of the market share of that firm. Since a monopolist has 100% market share, the Herfindahl index is equal to 1 squared, which is 1. However, the question asks for the index for a pure monopolist, which implies that there are no other firms in the market. In this case, the index would be equal to 1 squared (100%) times the number of firms in the market, which is 1. Therefore, the index is equal to 1 x 1, which is 1. To convert this to the commonly used scale of 0 to 10,000, we multiply by 10,000 to get an index of 10,000. Hence, the answer is B.

The Herfindahl Index for a Pure Monopolist Is