Economics (Irwin Economics)
21st Edition
ISBN: 9781259723223
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 14.2, Problem 1QQ
To determine
Calculate Herfindahl index.
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Suppose that three firms make up the entire wig manufacturing industry. One has a 50% market share, and the other two have a 25% market share each.
The Herfindahl index of this industry is a. 3,750
b. 1,000
c. 10,000
d. 5,000
e. 2,500
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 __--
a. remain the same
b. fall
c. rise
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 index of 10,000 corresponds to a monopoly firm with 100% market share
c. an industry with an index higher than 10,000 is automatically regulated by the Justice
Department
Suppose that three firms make up the entire wig manufacturing industry. One has a 50% market share, and the other two have a 25% market share each.
The Herfindahl index of this industry is _____.
a. 3,750
b. 1,000
c. 10,000
d. 5,000
e. 2,500
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 _____.
a. remain the same
b. fall
c. rise
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 index of 10,000 corresponds to a monopoly firm with 100% market share
c. an industry with an index higher than 10,000 is automatically regulated by the Justice Department
You are the manager in a market composed of eight firms, each of which has a 12.5 percent market share. In addition, each firm has a strong financial position and is located within a 100-mile radius of its competitors.
a. Calculate the premerger Herfindahl-Hirschman index (HHI) for this market.
b. Suppose that any two of these firms merge. What is the postmerger HHI?
Chapter 14 Solutions
Economics (Irwin Economics)
Ch. 14.2 - Prob. 1QQCh. 14.2 - The D2e segment of the demand curve D2eD1 graph...Ch. 14.2 - Prob. 3QQCh. 14.2 - Prob. 4QQCh. 14 - Prob. 1DQCh. 14 - Prob. 2DQCh. 14 - Prob. 3DQCh. 14 - Prob. 4DQCh. 14 - Prob. 5DQCh. 14 - Prob. 6DQ
Ch. 14 - Prob. 7DQCh. 14 - Prob. 8DQCh. 14 - Prob. 9DQCh. 14 - Prob. 10DQCh. 14 - Prob. 11DQCh. 14 - Prob. 12DQCh. 14 - Prob. 13DQCh. 14 - Prob. 14DQCh. 14 - Prob. 1RQCh. 14 - Prob. 2RQCh. 14 - Prob. 3RQCh. 14 - Prob. 4RQCh. 14 - Prob. 5RQCh. 14 - Prob. 6RQCh. 14 - Prob. 7RQCh. 14 - Prob. 8RQCh. 14 - Prob. 9RQCh. 14 - Prob. 10RQCh. 14 - Prob. 1PCh. 14 - Prob. 2PCh. 14 - Prob. 3P
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Similar questions
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- Suppose that firms in an industry have identicalcost structures and the industry is in long-runequilibrium. Explain how the profit motive couldlead to lower market prices.arrow_forwardSuppose there are N=8 hospitals in the market, and each of them has an equal share of the market (1/8). What is the value of the Herfindahl-Hirschman Index in this hospital market? One of the hospitals gets a fancy new cardiac surgery facility, and takes market share from the other hospitals. Now its market share is 85%, and the other 7 hospitals split the remaining 15% of the market equally. What is the value of the HHI in this case? Are each of these markets competitive or concentrated?arrow_forwardCarrot Computers and its competitors purchase touch screens for their tablet computers from several suppliers. The six makers of touch screens have market shares of, respectively, 19 percent, 18 percent, 14 percent, 16 percent, 20 percent, and 13 percent. a. What is the Herfindahl index for the touch screen manufacturing industry? b. By how much would a proposed merger between the two smallest touch screen makers increase the Herfindahl index? Would the government be likely to challenge that proposed merger? c. If Carrot Computers horizontally merges with its competitor Blueberry Handhelds, by how much would the Herfindahl index change for the touch screen industry?arrow_forward
- Industry A consists of four firms, each of which has an equal share of the market. Compute the Herfindahl-Hirschman index for the industry. Industry B consists of 10 firms, each of which has an equal share of the market. Compare the Herfindahl–Hirschman Indexes for the two industries. Now suppose that there are 100 firms in the industry, each with equal shares. What is the Herfindahl-Hirschman index for this industry? State the general relationship between the competitiveness of an industry and its Herfindahl-Hirschman indexarrow_forwardQ12 Assume the top six firms producing random access memory (RAM) in Canada comprising the industry have market shares of 21, 17, 16, 11, 9, and 6 percent. The remaining 10 firms each have market shares of 2 percent. The Herfindahl index for the RAM industry is Multiple Choice 65. 1,107. 1,264. 1,224.arrow_forward1. Exercise 16.2 An industry is composed of Firm 1, which controls 50 percent of the market, Firm 2 with 30 percent of the market, and Firm 3 with 10 percent of the market. About 20 firms of approximately equal size divide the remaining 10 percent of the market. What is the Herfindahl-Hirschman Index for the industry? (Hint: Assume the 20 firms that make up 10 percent of the market constitute one firm.)What will the Herfindahl-Hirschman Index be if Firm 2 and Firm 3 merge? (Hint: Assume that the combined market share after the merger is 40 percent) Based on the HHI scores, will the government consider the merger of Firm 2 with Firm 3 to be procompetitive or anticompetitive? Anticompetitive Procompetitiarrow_forward
- You are the manager in a market composed of 20 firms, each of which has a 5.00 percent market share. In addition, each firm has a strong financial position and is located within a 100-mile radius of its competitors. a. Calculate the premerger Herfindahl-Hirschman index (HHI) for this market? b. Suppose that any two of these firms merge. What is the postmerger HHI? c. Based only on the information contained in this question and on the U.S. Department of Justice Horizontal Merger Guidelines described in this chapter, do you think the Justice Department would attempt to block a merger between any two of the firms?multiple choice It may but will also consider other factors. It likely will not. It likely will.arrow_forwardFirm Market Share (%) A 20 B 20 C 20 D 20 E 10 F 10 Refer to the data. If all the firms in the industry merged into a single firm, the Herfindahl index would become Group of answer choices 100. 1,000. 10,000. 100,000.arrow_forwardWhat is the, HHI, Herfindahl-Hirschman Index for an industry where six companies each have a market share of 15% and one company which has a market share of 10%?arrow_forward
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