$~~~~~~~\text { Industry } X \quad~~~~~~~~~~~~~ \text { Industry } Y \quad~~~~~~~~~~~ \text { Industry } Z$
$\begin{array}{cccccc}
&\text { Market } && \text { Market } && \text { Market }\
\text { Firm } & \text { Share (\%) } & \text { Firm } & \text { Share (\%) } & \text { Firm } & \text { Share (\%) } \
1 & 60 & 1 & 40 & 1 & 50 \
2 & 10 & 2 & 25 & 2 & 10 \
3 & 10 & 3 & 15 & 3 & 10 \
4 & 5 & 4 & 10 & 4 & 10 \
5 & 5 & 5 & 5 & 5 & 10 \
6 & 5 & 6 & 5 & 6 & 10\
7&5
\end{array}$
-The highest Herfindahl-Hirschman Index

Question

Quizplus · Accepted Answer

The Herfindahl-Hirschman Index (HHI) is calculated by squaring the market share of each firm competing in the market and then summing the resulting numbers. It can range from close to zero to 10,000 (if there's only one firm with 100% of the market). For Industry X, the HHI is $60^2 + 10^2 + 10^2 + 5^2 + 5^2 + 5^2 + 5^2 = 3600 + 100 + 100 + 25 + 25 + 25 + 25 = 3900$. For Industry Y, the HHI is $40^2 + 25^2 + 15^2 + 10^2 + 5^2 + 5^2 = 1600 + 625 + 225 + 100 + 25 + 25 = 2600$. For Industry Z, the HHI is $50^2 + 10^2 + 10^2 + 10^2 + 10^2 + 10^2 = 2500 + 100 + 100 + 100 + 100 + 100 = 3000$. Therefore, Industry X has the highest HHI, indicating the highest level of market concentration among the three industries.

Industry X Industry Y Industry Z~~~~~~~\text { Industry } X \quad~~~~~~~~~~~~~ \text { Industry } Y \quad~~~~~~~~~~~ \text { Industry } Z Industry X Industry Y Industry Z

$~\text { Industry } X \quad~ \text { Industry } Y \quad~~~~~ \text { Industry } Z$