Question

If there are two firms in an industry and each has 50 percent market share, then the Herfindahl-Hirschman Index equals

2,500.

2,800.

5,000.

6,600.

Answer 1

The Herfindahl-Hirschman Index (HHI) is calculated by summing the squares of the market share of each firm in the industry. In this case, with two firms each having a 50 percent market share, the HHI equals 2,500.

Step-by-step explanation:

The Herfindahl-Hirschman Index (HHI) is used to measure industry concentration. It is calculated by summing the squares of the market share of each firm in the industry. In this case, if there are two firms in an industry and each has a 50 percent market share, then the HHI can be calculated as follows:

HHI = (50²) + (50²) = 2,500

Therefore, the correct answer is 2,500.

Answer 2

The Herfindahl-Hirschman Index (HHI) is a measure of market concentration. If there are two firms in an industry with equal market share, the HHI would equal 5,000.

Step-by-step explanation:

The Herfindahl-Hirschman Index (HHI) is a metric used to quantify industrial market concentration. It is computed by adding together the market share squares of every company in the sector. The resulting index gives a sense of how competitive the market is. The Herfindahl-Hirschman Index (HHI) is a measure of market concentration.

It is calculated by summing the squares of the market share of each firm in the industry.

In this case, if there are two firms in the industry and each has a 50% market share, the HHI would be calculated as (0.5^2 + 0.5^2) x 10000, where 10000 is a scaling factor.

Therefore, the correct answer is 5,000.