Suppose the Herfindahl indexes for industries A, B, and C are 1,200, 5,000, and 7,500 respectively. These data imply that

A) market power is greatest in industry A.
B) market power is greatest in industry B.
C) market power is greatest in industry C.
D) industry A is more monopolistic than industry C.

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Quynh Nguyen · Accepted Answer

Final Answer : C, Explanation :  The Herfindahl index is a measure of the size of firms in relation to the industry and an indicator of the amount of competition among them. A higher Herfindahl index indicates a higher concentration and thus more market power. With indexes of 1,200 for industry A, 5,000 for industry B, and 7,500 for industry C, industry C has the highest index and therefore the greatest market power.

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Suppose the Herfindahl indexes for industries A, B, and C are 1,200, 5,000, and 7,500 respectively. These data imply thatA) market power is greatest in industry A.B) market power is greatest in industry B.C) market power is greatest in industry C.D) industry A is more monopolistic than industry C.

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