Industries X and Y both have four-firm concentration ratios of 65 percent,but the Herfindahl index for X is 1,500 while that for Y is 2,000.These data suggest:

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The Herfindahl index is a measure of market concentration that takes into account the size distribution of firms in a market. A higher value of the Herfindahl index indicates greater market concentration, and thus greater market power. Therefore, since Y has a higher Herfindahl index than X, it suggests that Y has greater market power than X. The four-firm concentration ratios are the same for both industries, so the difference in the Herfindahl index is the key factor here.

Industries X and Y Both Have Four-Firm Concentration Ratios of 65