Question

Table 252 Pool Sweeper North Star Hurricane Blue Lagoon Clean Sweep Output (Revenue) $20,000 $16, $2,600 $2,000 Refer to Table 25.2. Assume there are only four firms in the pool sweeper industry. What is the Hertindah Hirschman Index for this industry 1 0 0 0 0 Prey 234 Next > ype here to search O mê xwe WEBOVUOL 57 On

Answer 1

Total Output = 20000 + 16000 + 2000 + 2000 = $40,000

Calculation of Market Share

North Star = (20,000 / 40,000) * 100 = 50%

Hurricane = 40%

Blue Lagoon = 5%

Clean Sweep = 5%

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

So, Option 4 is the correct answer.

Since HHI is greater than 2150

So, we can say it is highly concentrated market place.

The Herfindahl-Hirschman Index (HHI) is a common measure of market concentration and is used to determine market competitiveness, often pre and post-Mergers and Acquisitions transactions. The Herfindahl-Hirschman Index (HHI) is a commonly accepted measure of market concentration. It is calculated by squaring the market share of each firm competing in a market and then summing the resulting numbers.

A market with an HHI of less than 1,500 is considered to be a competitive marketplace, an HHI of 1,500 to 2,500 to be a moderately concentrated marketplace, and an HHI of 2,500 or greater to be a highly concentrated marketplace.