What does the Herfindahl-Hirschman Index measure? How is it calculated?
The Herfindahl-Hirschman (HHI) Index measures industry concentration. It is calculated by taking the market shares (s) of every firm in the industry, squaring them, and adding them up to get a total:
HHI = s12 + s22 + s32 + … + sn2, where n is the number of firms in the industry.
If an industry is dominated by a monopoly, then the HHI would reach its maximum value of 1002 = 100,000 . For an extremely competitive industry, with dozens or hundreds of extremely small competitors, the value of the HHI might drop as low as 100 or even less. For example, if an industry has 100 firms that each have 1% of the market, then the HHI is 100 × (12) = 100.
You might also like to view...
A decrease in United States net foreign direct investment would occur if
A) net capital flows increase. B) net foreign investment decreases. C) U.S. citizens have decreased the value of foreign stocks and bonds they own. D) U.S. citizens have decreased their building or purchasing of facilities in foreign countries.
Analyze the following statement: "I know the fact that prices have started to rise rapidly seems like bad news, but at least prices starting to go up means that output must be starting to go up as well."
What will be an ideal response?
Refer to the graph above. Which of the following factors will shift AS 1 to AS 3?
A decrease in business taxes An increase in input prices An increase in productivity A decrease in household indebtedness
Which of the following statements is true?
A. To maximize profits, a firm must maximize total revenue. B. In long-run equilibrium, a competitive firm produces at the point of minimum average total cost. C. In the short-run, a perfectly competitive firm produces where total cost is minimum. D. In the short-run, a perfectly competitive firm will close down whenever price is less than average total cost.