Question

Table 25.2 . Pool Sweeper North Star Hurricane Blue Lagoon Clean Sweep Output (Revenue) $20,000 $ 16,000 $2,000 $2,000 Refer to Table 25.2. Assume there are only four pool sweeper industry. What is the Herfindahl-Hirschman Index for this industry?

Answer 1

1) HHI = Sum of the square of the market share of each firm in the industry

Total output = 20000+16000+2000+2000 = 40000

Share of

north star = 20000/40000 = 50%

Hurricane = 16000/40000 = 40%

Blue lagoon = 2000/40000 = 5%

Clean sweep = 2000/40000 = 5%

HHI = 50^2+40^2+5^2+5^2 = 2500+1600+25+25 = 4150

As per HOMEWORKLIB RULES, only the first question can be answered.