Question

When ratios are used to evaluate a firm and they are compared to other similar firms it may be referred to as? __________________.

Answer 1

A four-firm concentration ratio and the Herfindahl-Hirschman Index (HHI) are two methods used to evaluate the extent of competition in a market.

Step-by-step explanation:

A four-firm concentration ratio is one way of measuring the extent of competition in a market. It is calculated by adding the market shares of the four largest firms in the market, which are typically the top four to eight firms. Another way of measuring competition is the Herfindahl-Hirschman Index (HHI). The HHI is calculated by taking the market shares of all firms in the market, squaring them, and then summing the total.