Question

Suppose an industry has 8 firms each with 9% of sales, and 4 firms each with 7% of sales. The HHI for this industry is:

A) 100
B) 844
C) 5968
D) 8496
E) None of these

Answer 1

B) 844

Step-by-step explanation:

The HHI is a formula to find the market concentration of the firms in a particular market. In order to find the HHI we square the shares of each firm in the market and sum them up So the formula becomes

(S1)^2 + (S2)^2..............................(SN)^2

In this question we have 8 firms with 9% share and 4 firms with 7% share so we will put these market shares in the formula

8*(9^2)+4*(7^2)=844