There are five firms in an industry.You know sales of the four largest firms are $1,000,000,$500,000,$400,000,and $178,000.If the C₄ ratio is 95 percent,then the HHI is:

Question

Quizplus · Accepted Answer

To calculate the HHI, we need to square the market shares of each firm and sum up the results.

The market share of the largest firm is 50% (sales of $1,000,000 out of a total of $2,078,000). The sum of the squares of the market shares of the other three firms is 22.5% (25% + 16% + 9/25%).

Adding the largest firm's market share to this sum gives us a total HHI of 72.5%. Since this is less than the critical value of 95%, we know that this market is not highly concentrated.

Therefore, the answer is C, 3,038.

There Are Five Firms in an Industry