Industry A has four firms,each with a 25% market share,while Industry B has four firms,one with a 70% market share and the other three with a 10% market share each.According to the Herfindahl-Hirschman Index (HHI),Industry A is highly concentrated.

Question

Quizplus · Accepted Answer

The Herfindahl-Hirschman Index (HHI) is calculated by summing the squares of the market shares of all firms in an industry. For Industry A, the HHI would be 4*(0.25)^2 = 0.25, which is considered moderately concentrated. In contrast, Industry B would have an HHI of 0.7^2 + 3*(0.1)^2 = 0.58, which is also moderately concentrated. Therefore, it is false that Industry A is highly concentrated according to the HHI.

Industry a Has Four Firms,each with a 25% Market Share,while