The largest firm in Industry Q has a 50% market share and the next five firms each has a market share of 10%.The largest firm in Industry R has a 40% market share and the next three firms each has a market share of 20%.Which statement is true?

Question

Quizplus · Accepted Answer

The Herfindahl-Hirschman Index (HHI) is calculated by summing the squares of the market shares of all firms in the industry. For Industry Q: HHI = 50^2 + 5*(10^2) = 2500 + 500 = 3000. For Industry R: HHI = 40^2 + 3*(20^2) = 1600 + 1200 = 2800. Therefore, Industry Q has a higher HHI than Industry R.

The Largest Firm in Industry Q Has a 50% Market