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(6 pts) A market has six competitors in it, with the following total sales amounts: FIRM...

  1. (6 pts) A market has six competitors in it, with the following total sales amounts:

FIRM

Total sales

A

$ 100 (million)

B

400

C

300

D

700

E

600

F

800

G

200
  1. Calculate the four firm concentration ratio for this industry. PLEASE TYPE ANSWER

  1. Calculate the Herfindahl index for this market. PLEASE TYPE ANSWER
  1. Based on your calculation in (b), would you classify this market as moderately or highly oligopolistic? Why? PLEASE TYPE ANSWER
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Answer #1

a) Four firm concentration = (800+700+600+400)/(800+700+600+400+300+200+100) = 80.65%

b) HHI = sum of the square of the share of each firm

FIRM Total sales % share square
A 100 3.23 10.41
B 400 12.90 166.49
C 300 9.68 93.65
D 700 22.58 509.89
E 600 19.35 374.61
F 800 25.81 665.97
G 200 6.45 41.62
3100 1862.64

HHI = 1862.64 or 1863

c) The industry is moderately oligopolistic as the value of HHI is between 1000 and 2500

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