An industry is comprised of five firms. Sales of the four largest firms are $1,000,000, $500,000,...
An industry is comprised of five firms. Sales of the four largest firms are $1,000,000, $500,000, $400,000, and $200,000. If the C4 ratio is 96 percent, then what is the HHI?
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2,755.
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3,046.
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None of the options.
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1,810.
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5,017.
Homework Answers
C4 = Total sales of four firms / Total sales by all five firms
= (1000000 + 500000 + 400000 + 200000) / (1000000 + 500000 + 400000 + 200000 + x)
= 2100000 / (2100000 + x)
As per given condition
0.96 = 2100000 / (2100000 + x)
(2100000 + x) = 2100000 / 0.96 = 2187500
x = 2187500 - 2100000 = 87500
HHI = 100^2 * [(1000000 / 2187500)^2 + (500000 / 2187500)^2 + (400000 / 2187500)^2 + (200000 / 2187500)^2 + (87500 / 2187500)^2 ]
= 0.3046 * 10000
= 3046
Second option is correct answer
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