Question

the herfindahl index is obtained by group of answer choices adding the squares of the market shares of each firm in the industry. adding the market shares of the largest four firms in the industry. finding the difference between the squares of the market shares of each firm in the industry. finding the difference between the market shares of each firm in the industry. none of the above

Answer 1

The Herfindahl-Hirschman Index (HHI) is a calculation used to measure the concentration in a market by adding the squares of the market shares of each firm in the industry.

Step-by-step explanation:

The Herfindahl-Hirschman Index (HHI) is a measure of market concentration and competition among firms within an industry. To calculate the HHI, we take the market shares of all firms in the market, square these individual market shares, and then sum them up.

This approach to measuring industry concentration helps us understand the market's competitive landscape, and a higher HHI reflects a less competitive market.