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Danny Bernal
on Dec 19, 2024

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An industry has five firms, each with a market share of 20 percent. There is no foreign competition, entry into the industry is difficult, and no firm is on the verge of bankruptcy. If two of the firms in the industry seek to merge, this action would most likely be opposed by the government because the Herfindahl index for the industry is

A) 2,000 and the merger would increase the index by 500.
B) 2,000 and the merger would increase the index by 800.
C) 2,500 and the merger would increase the index by 500.
D) 2,500 and the merger would increase the index by 1,200.

Herfindahl Index

A gauge for determining the scale of businesses in comparison to the entire sector, illustrating the degree of competitiveness.

Market Share

The portion of a market controlled by a particular company or product, often expressed as a percentage of total sales in that market.

Foreign Competition

The presence and impact of producers from other countries competing in a domestic market.

  • Gain insight into the objectives and computational methods of the Herfindahl Index when assessing market concentration.
  • Acknowledge the influence and repercussions of antitrust regulations on entrepreneurial activities and industrial architecture.
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Lianne CamilleriDec 21, 2024
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