-Consider an oligopoly that has two firms, one with a 75 percent market share and the other with a 25 percent market share. The Herfindahl index for this market is:
A)5,625.
B)6,250.
C)625.
D)5,000.
E)8,500.

Question

-Consider an oligopoly that has two firms, one with a 75 percent market share and the other with a 25 percent market share. The Herfindahl index for this market is:
A)5,625. 
B)6,250. 
C)625. 
D)5,000. 
E)8,500.

Quizplus · Accepted Answer

The Herfindahl index is calculated by squaring the market share of each firm in the market and then summing the results. For the two firms with market shares of 75% and 25%, the calculation is (75^2) + (25^2) = 5625 + 625 = 6250.

-Consider an Oligopoly That Has Two Firms, One with a 75