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alukav5142 [94]
3 years ago
7

1. The Herfindahl index: Suppose that three firms make up the entire bicycle manufacturing industry. One has a 40% market share,

and the other two have a 30% market share each. The Herfindahl index of this industry is ___.
2. Abe's Bikes, one of the firms with a 30% market share in the bicycle manufacturing industry, leaves the market. This would cause the Herfindahl index for the industry to _______. (rise/remain the same/fall)
3. The largest possible value of the Herfindahl index is 10,000 because:

a. An index of 10,000 corresponds to 100 firms with a 1% market share each.
b. An industry with an index higher than 10,000 is automatically regulated by the Justice Department.
c. An index of 10,000 corresponds to a monopoly firm with 100% market share.
Business
1 answer:
alukav5142 [94]3 years ago
3 0

Answer:

3400, Rise, C

Explanation:

1. Since there are just 3 firms and two already has a sum total of 70% (40+30), the third firm will have a market share of 30%

HHI= 40^{2}+ 30^{2}+30^{2}\\

HHI= 1600+900+900

HHI= 3400

2. Abe's Bikes with 30% leaves the market, if the two firms were to share Abe's market share equally (15+15), it will leave Firm A with 55% (40+15) and Firm B with (30+15) 45%

Therefore,

HHI= 55^{2}+45^{2}

HHI=3025+2025

HHI= 5050

A rise in HHI

3. C

An index of 10,000 corresponds to a monopoly firm with 100% market share.

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