There are five firms in the cresset industry.The market shares of the five firms are 60 percent,15 percent,15 percent,6 percent,and 4 percent.The Herfindahl-Hirschman Index is _____

Question

Quizplus · Accepted Answer

To calculate the Herfindahl-Hirschman Index (HHI), we need to square the market shares of each firm, and then add them up.

HHI = (0.6)^2 + (0.15)^2 + (0.15)^2 + (0.06)^2 + (0.04)^2
HHI = 0.36 + 0.0225 + 0.0225 + 0.0036 + 0.0016
HHI = 0.4052

Since the HHI is usually expressed as a whole number, we need to multiply by 10,000:
HHI = 4,052

Therefore, the answer is D.

There Are Five Firms in the Cresset Industry