Asked by
Anisha Karmacharya
on Dec 19, 2024
Verified
Suppose that a particular industry has a four-firm concentration ratio of 25 and a Herfindahl index of 600. Most likely, this industry would achieve
A) $15M for firm A and $5M for firm B.
B) $17M for firm A and $17M for firm B.
C) $3M for firm A and $3M for firm B.
D) $5M for firm A and $15M for firm B.
Herfindahl Index
A measure of market concentration used to evaluate the level of competition within an industry, calculated by summing the squares of each firm's market share.
Four-Firm Concentration Ratio
A metric that measures the total market share possessed by the four largest firms within a specific industry.
- Understand the concept and calculation of the four-firm concentration ratio and its implications for market structure.
- Develop an understanding of the Herfindahl index, its methodical calculation, and its pivotal role in determining the extent of market control in various industries.
Verified Answer
MB
Learning Objectives
- Understand the concept and calculation of the four-firm concentration ratio and its implications for market structure.
- Develop an understanding of the Herfindahl index, its methodical calculation, and its pivotal role in determining the extent of market control in various industries.