Question

If there are five firms in an industry and the market shares of the firms are 45 percent, 22 percent, 17 percent, 10 percent and 6 percent. The four-firm concentration ratio for this industry is __________________ percent and the Herfindahl Index is ________________.

Answer 1

Answer:

94% and 2934

Explanation:

The computation of the four-firm concentration ratio for this industry is

= (Total four firms market shares in an industry ) ÷ (Total firm market shares in an industry)

= (45% + 22% + 17% + 10%) ÷ (45% + 22% + 17% + 10% + 6%)

= 94% ÷ 100%

= 94%

Now the Herfindahl Index is the sum of square of all firm market share

= 45^2 + 22^2 + 17^2 + 10^2 + 6^2

= 2934