The Herfindahl-Hirschman index is a measure of
A) the profit margin of an industry.
B) market size.
C) the degree of collusion among firms in a market.
D) the degree of concentration among firms in a market.

Question

Quizplus · Accepted Answer

The Herfindahl-Hirschman index (HHI) is a measure of market concentration. It is calculated by squaring each firm's market share and adding them together. The resulting HHI score ranges from close to zero for a highly competitive market to 10,000 for a monopoly. The higher the HHI score, the more concentrated the market is, and the fewer firms that control the market. Therefore, the correct answer is D, the degree of concentration among firms in a market.

The Herfindahl-Hirschman Index Is a Measure of