Question

There are ten firms in an industry. Five of the firms each have a market share of 12 percent and five of the firms each have a market share of 8 percent. The Herfindahl index is Group of answer choices 1,000. 1,040. 100. 920. none of the above

Answer 1

1,040

Step-by-step explanation:

The Herfindahl index is an index that is used to measure the size of firms in relation to the industry and it also shows the level of competition among the firms in the industry. The Herfindahl index is also known as Herfindahl–Hirschman Index (HHI).

The Herfindahl index is calculated by summing the square of the market share of all firms in the industry. For this question, it can be calculated as follows:

Herfindahl index = (12^2 * 5) + (8^2 * 5) = 720 + 320 = 1,040.