Industry X has four firms. The largest firm in Industry X has more than 90 perce
ID: 1215134 • Letter: I
Question
Industry X has four firms. The largest firm in Industry X has more than 90 percent of the market share. Industry Y also has four firms, but each of those four firms in Industry Y has 25 percent of the market share. The Herfindahl-Hirschman index will be
A.the same for both industries, but the four-firm concentration will be larger for Industry X than Industry Y.
b.larger for Industry Y than Industry X, but the four-firm concentration will be the same.
c.larger for Industry X than Industry Y, but the four-firm concentration will be the same.
d.the same for both industries, but the four-firm concentration will be larger for Industry Y than Industry X.
Explanation / Answer
c.larger for Industry X than Industry Y, but the four-firm concentration will be the same.
c is answer
HHI is higher for X because of larger share for one firm which is higher than 90% that means higher concentartion and less competition, so which means higher HHI
as There are 4 firms , both will have 100% four firm concentartion