Assume the top six firms comprising an industry have market shares of 21, 17, 16, 11, 9, and 6 percent. The remaining 10 firms each have market shares of 2 percent. The Herfindahl index for this industry is

A) 1,107.
B) 65.
C) 1,264.
D) 1,224.

Question

aedan mahoney · Accepted Answer

Final Answer : C, Explanation :   The Herfindahl index is calculated by squaring the market share of each firm competing in the market and then summing the resulting numbers. For the given industry:- The top six firms have market shares of 21%, 17%, 16%, 11%, 9%, and 6%. Squaring each and summing gives:   2 1 2 + 1 7 2 + 1 6 2 + 1 1 2 + 9 2 + 6 2 = 441 + 289 + 256 + 121 + 81 + 36 = 1224 21^2 + 17^2 + 16^2 + 11^2 + 9^2 + 6^2 = 441 + 289 + 256 + 121 + 81 + 36 = 1224 2 1 2 + 1 7 2 + 1 6 2 + 1 1 2 + 9 2 + 6 2 = 441 + 289 + 256 + 121 + 81 + 36 = 1224  .- The remaining 10 firms each have a market share of 2%. Squaring 2% gives 4, and since there are 10 such firms, this adds   10 × 4 = 40 10 	imes 4 = 40 10 × 4 = 40   to the sum.Adding these together:   1224 + 40 = 1264 1224 + 40 = 1264 1224 + 40 = 1264  . Therefore, the Herfindahl index for this industry is 1,264.

Assume the top six firms comprising an industry have market shares of 21, 17, 16, 11, 9, and 6 percent. The remaining 10 firms each have market shares of 2 percent. The Herfindahl index for this industry is

A) 1,107.
B) 65.
C) 1,264.
D) 1,224.

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Assume the top six firms comprising an industry have market shares of 21, 17, 16, 11, 9, and 6 percent. The remaining 10 firms each have market shares of 2 percent. The Herfindahl index for this industry isA) 1,107.B) 65.C) 1,264.D) 1,224.

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Related questions

Assume the top six firms comprising an industry have market shares of 21, 17, 16, 11, 9, and 6 percent. The remaining 10 firms each have market shares of 2 percent. The Herfindahl index for this industry is

A) 1,107.
B) 65.
C) 1,264.
D) 1,224.