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HHI of the industry A is 1,000 and another industry, B is 4,000 (in 0 to...

HHI of the industry A is 1,000 and another industry, B is 4,000 (in 0 to 10,000 scale).


a. industry A is leaning towards monopoly


b. industry B is leaning towards monopoly


c. Industry A is concentrated by fewer number of large firms than industry B


c. industry A got only 1 firm and an industry B has got 4 firms

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Answer #1

Correct option is (C): Industry A is concentrated by fewer number of large firms than B.

The higher (lower) the HHI, the higher (lower) the market concentration and the higher (lower) the number of large dominating firms in the industry. Since HHI in B is higher, B has higher number of large firms with high market power, and A has higher number of small firms with low market power.

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