An industry consists of five firms with equal annual sales.What is the industry's HHI?

Question

Quizplus · Accepted Answer

The Herfindahl-Hirschman Index (HHI) is calculated by squaring the market share of each firm competing in the market and then summing the resulting numbers. For five firms with equal annual sales, each would have a market share of 20% (100% / 5). Squaring this 20% gives 400 (as we use the percentage figures directly, it's 20^2 = 400). Summing these squared market shares for all five firms gives an HHI of 2,000 (400 * 5 = 2,000).

An Industry Consists of Five Firms with Equal Annual Sales