The herfindahl index suppose that three firms make up the entire wig manufacturing industry. one has a 50% market share, and the
1 answer:
Part A:
Given that three firms make up the entire wig manufacturing industry<span>. One has a 50% market share, and the other two have a 25% market share each. The Herfindahl index of this industry is given by:
</span><span>The Herfindahl-Hirschman index (HHI) is a commonly accepted measure of market concentration. It is calculated by squaring the market share of each firm competing in a market, and then summing the resulting numbers, and can range from close to zero to 10,000.
Therefore, the Herfindahl-Hirschman Index is given by:
Part B:
Mane attraction, one of the firms with a 25% market share in the wig manufacturing industry, leaves the market. This would cause the herfindahl index for the industry to increase.
The HHI increases as firms leaves the market. As firms leaves the market the shares of the market previously held by the leaving firms are shared amongst the remaining firms in the market thereby increasing the HHI.
For instance, assumint the firm with 50% of market share acquired additional 10% of the leaving firm's market share and the other firm with 25% acquired the remaining 15%.
The new HHI is given by:
</span><span><span>
</span>
Part C:
The largest possible value of the herfindahl index is 10,000 because: an index of 10,000 corresponds to a monopoly firm with 100% market share</span>.
Given that three firms make up the entire wig manufacturing industry<span>. One has a 50% market share, and the other two have a 25% market share each. The Herfindahl index of this industry is given by:
</span><span>The Herfindahl-Hirschman index (HHI) is a commonly accepted measure of market concentration. It is calculated by squaring the market share of each firm competing in a market, and then summing the resulting numbers, and can range from close to zero to 10,000.
Therefore, the Herfindahl-Hirschman Index is given by:
Part B:
Mane attraction, one of the firms with a 25% market share in the wig manufacturing industry, leaves the market. This would cause the herfindahl index for the industry to increase.
The HHI increases as firms leaves the market. As firms leaves the market the shares of the market previously held by the leaving firms are shared amongst the remaining firms in the market thereby increasing the HHI.
For instance, assumint the firm with 50% of market share acquired additional 10% of the leaving firm's market share and the other firm with 25% acquired the remaining 15%.
The new HHI is given by:
</span><span><span>
Part C:
The largest possible value of the herfindahl index is 10,000 because: an index of 10,000 corresponds to a monopoly firm with 100% market share</span>.
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Answer:
Selling Price per unit = $287.5 per unit
Explanation:
Provided quantum of sales = 10,000 units
Cost statement for 10,000 units
Direct material = $100 10,000 = $1,000,000
Direct Labor = $30 10,000 = $300,000
Variable Overhead = $45 10,000 = $450,000
Fixed Overhead Costs = $635,000
Fixed Selling and administrative Cost = $115,000
Total = $2,500,000
Add: Profit mark up 15% = $375,000
Total Selling Value = $2,875,000
Selling Price per unit = $2,875,000/10,000 = $287.5 per unit