There are five firms in an industry.You know sales of the four largest firms are $800,000,$700,000,$440,000,and $230,000.If the C₄ ratio is 80 percent,then the HHI is:

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First, we need to calculate the market share of the fifth firm: Market share of firm 5 = 100% - 80% (C₄) = 20% Sales of firm 5 = 100 / 20 x $230,000 = $1,150,000 Total market sales = $3,320,000 ($800,000 + $700,000 + $440,000 + $230,000 + $1,150,000) HHI = (0.8 x 800^2) + (0.8 x 700^2) + (0.8 x 440^2) + (0.8 x 1,150^2) + (0.2 x 230^2) HHI = 2,271 Therefore, the answer is B.

There Are Five Firms in an Industry