Economics (with Digital Assets, 2 Term (12 Months) Printed Access Card)
12th Edition
ISBN: 9781285738338
Author: Roger A. Arnold
Publisher: Cengage Learning
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Chapter 26.1, Problem 3ST
To determine
Explain the advantage of Herfindahl index over four-firm and eight-firm concentration ratios.
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what is the Four-firm concentration ratio (CR4)?
what is the Herfindahl-Hirshman Index (HHI)?
and how are they different?
Use Table to calculate the four-firm concentration ratio for the U.S. auto market. Does this indicate a concentrated market or not?
Is it true that a merger between two firms that are not already in the top four by size can affect both the four-firm concentration ratio and the Her findahl-Hirshman Index? Explain briefly.
Chapter 26 Solutions
Economics (with Digital Assets, 2 Term (12 Months) Printed Access Card)
Ch. 26.1 - Prob. 1STCh. 26.1 - Prob. 2STCh. 26.1 - Prob. 3STCh. 26.2 - Prob. 1STCh. 26.2 - Prob. 2STCh. 26.2 - Prob. 3STCh. 26.2 - Prob. 4STCh. 26 - Prob. 1VQPCh. 26 - Prob. 2VQPCh. 26 - Prob. 3VQP
Ch. 26 - Prob. 4VQPCh. 26 - Prob. 5VQPCh. 26 - Prob. 1QPCh. 26 - Prob. 2QPCh. 26 - Prob. 3QPCh. 26 - Prob. 4QPCh. 26 - Prob. 5QPCh. 26 - Prob. 6QPCh. 26 - Prob. 7QPCh. 26 - Prob. 8QPCh. 26 - Prob. 9QPCh. 26 - Prob. 10QPCh. 26 - Prob. 11QPCh. 26 - Prob. 12QPCh. 26 - Prob. 13QPCh. 26 - Prob. 14QPCh. 26 - Prob. 1WNGCh. 26 - Prob. 2WNGCh. 26 - Prob. 3WNGCh. 26 - Prob. 4WNG
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- Is it true that a merger between two films that are not already in the top four by size can affect both the four-firm concentration ratio and the Herfindahl-Hirshmau Index? Explain briefly.arrow_forwardSuppose that the most popular car dealer in your area sells 10 percent of all vehicles. If all other car dealers sell either the same number of vehicles or fewer, what is the largest value that the Herfindahl index could possibly take for car dealers in your area? In that same situation, what would the four-firm concentration ratio be?arrow_forwardBased on this information, the four-firm concentration ratio is?arrow_forward
- "The Herfindahl-index (HHI) is empty and obscure, giving little clear basis for assessing the degree of actual market power". "The HHI is more broadly based and accurate than simple four-firm concentration ratios". a. Are both statements true? b. Is one ratio generally better? Explain with examples.arrow_forwardPlace the black point (plus symbol) on the following graph to indicate the profit-maximizing price and combined quantity of output if Mays and McCovey choose to work together. 2.00 Demand 1.80 Monopoly Outcome 1.60 1.40 MC = ATC 1.20 1.00 0.80 0.60 0.40 0.20 MR 90 180 270 360 450 540 630 720 810 900 QUANTITY (Cans of beer) PRICE (Dollars per can)arrow_forwardSuppose that the most popular car dealer in your area sells 25 percent of all vehicles. Instructions: Enter your answers as a whole number. a. If all other car dealers sell either the same number of vehicles or fewer, what is the largest value that the Herfindahl index could possibly take for car dealers in your area? b. In that same situation, what would the four-firm concentration ratio be? percentarrow_forward
- The following table presents information on the production of five firms that produce all of the output in an industry. Firm A B с D E Output (units) 900 900 900 100 100 Instructions: Round your answers to two decimal places. a. What is the four-firm concentration ratio for this industry? b. What is the Herfindahl-Hirschman Index for this industry?arrow_forwardHow do we measure a four-firm concentration ratio? What does a high measure mean about the extent of competition?arrow_forwardStep 1 of 2: Use the following table with the sample data to calculate the four-firm concentration ratio for the U.S. auto market. Round your answer to the nearest whole number if necessary. Market Shares in the U.S. Auto Market GM 18%18% Ford 16%16% Toyota 14%14% Chrysler 10%arrow_forward
- Question C2 The Australian Competition and Consumer Commission (ACCC) has opened an investigation regarding collusion between the two major firms producing fire protection gear for bush firefighters. The firms - Azure Associates and Blue Guard - contend that they are quantity competitors and that the prices they are charging are a result of an increase in price by their suppliers. As part of the case, the ACCC has noted that the Australian firefighters typically purchase their own protective gear and are thus price takers in the market. Both the ACCC and the two firms under investigation agree that the market demand can be described by the inverse demand function: P(Q)=240-Q, where Q is the total quantity provided by the two firms (i.e., Q=q₁ + 9B, where is the 9A amount produced by Azure Associates and q, is the amount produced by Blue Guard). All parties also agree that the two firms have identical production technologies and that the two firms have the same constant marginal cost of…arrow_forwardThe following table lists the market shares of the eight firms in an industry. Market Shares of Eight Firms in an Industry Firm Market Share 1 3333 2 2828 3 1515 4 88 5 55 6 55 7 44 8 22 Calculate the four-firm concentration ratio for this industry. Enter your answer in the box below, and round to the nearest whole number if necessary.arrow_forwardSuppose that a small town has six burger shops whose respective shares of the local market are (as percentages of all hamburgers sold): 26%, 20%, 18%, 14%, 12%, 10%, What is the four-firm concentration ratio of the hamburger industry and what is the Hirchmann Herfindahl Index (HHI) for the hamburger industry in this town?arrow_forward
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