An industry consists of eight firms with annual sales (in millions)of $200,$300,$900,$600,$300,$700,$500,and $600.What is the industry's C₄?

Question

Quizplus · Accepted Answer

The industry's C₄, or Herfindahl-Hirschman Index (HHI), is calculated by squaring the market share of each firm individually, then summing those numbers. The market shares are based on the sales of the firms. First, calculate the total sales: $200m + $300m + $900m + $600m + $300m + $700m + $500m + $600m = $4100m. Then, calculate the squares of each firm's market share (sales/total sales * 100)^2 and sum them: (4.88)^2 + (7.32)^2 + (21.95)^2 + (14.63)^2 + (7.32)^2 + (17.07)^2 + (12.20)^2 + (14.63)^2 = 0.68 (rounded to two decimal places).

An Industry Consists of Eight Firms with Annual Sales (In