The Herfindahl-Hirschman index equals _____ when _____ have/has _____% of the market.
A)10,000;four firms each;25
B)5,000;three firms each;33
C)5,000;two firms each;50
D)100,000;one firm;100

Question

Quizplus · Accepted Answer

The formula for the Herfindahl-Hirschman index is the sum of squared market shares of all firms in the market. For option C, with two firms each having 50% of the market, the index is (0.50)^2 + (0.50)^2 = 0.25 + 0.25 = 0.50, which gives a HHI of 5,000. Therefore, option C is the correct answer. Option A would have a HHI of 10,000 and option B would have a HHI of 3,333. Option D, with one firm having 100% of the market, would have a HHI of 100,000.

The Herfindahl-Hirschman Index Equals _____ When _____ Have/has _____% of the Market

The Herfindahl-Hirschman Index Equals ___ When _ Have/has ___% of the Market