Final answer:
The question discusses the determinants of a firm's profitability, attributing it to both industry characteristics and firm actions and behaviors. Evidence of competition includes aggressive marketing and innovation, with the technology and retail sectors serving as examples. The HHI is a measure of market concentration and competition.
Step-by-step explanation:
The question pertains to the determinants of a firm's profitability within its industry. Research suggests that a significant portion of a firm's profitability can be attributed to the characteristics of the industry in which it operates. Specific percentages are not provided in the question; however, the understanding is that both industry dynamics and individual firm actions contribute to profitability.
Evidence of serious competition between firms in an industry may include aggressive marketing strategies, price wars, and innovation races. Highly competitive industries typically have low barriers to entry and may experience frequent business exits and entries as firms vie for market share.
Two examples of highly competitive industries are the technology sector, where rapid innovation and fast product lifecycles are common, and the retail industry, which experiences fierce competition both in brick-and-mortar stores and online marketplaces. Understanding the model of perfectly competitive firms, business exits, and market share concentration, such as through Herfindahl-Hirschman Index (HHI) calculations, provides insight into the competitive landscape of an industry.