An industry consists of six firms with annual sales of $300,$500,$400,$700,$600,and $600.According to the general rule of thumb,the HHI of this industry implies that the market structure is:

Question

Quizplus · Accepted Answer

HHI (Herfindahl-Hirschman Index) is a measure of market concentration. It is calculated by summing the squares of the market shares of all firms in the industry. In this case, the HHI can be calculated as:

HHI = (0.1)^2 + (0.167)^2 + (0.133)^2 + (0.233)^2 + (0.2)^2 + (0.2)^2 = 0.098

As per the general rule of thumb, an HHI of less than 0.15 indicates a competitive market structure, an HHI of 0.15 to 0.25 indicates moderate concentration, and an HHI above 0.25 indicates high concentration. Since the HHI in this case is less than 0.15, it implies a competitive market structure. Therefore, the best choice is B, noncompetitive.

An Industry Consists of Six Firms with Annual Sales of $300,$500,$400,$700,$600,and