Compare two markets. In one market, the HHI is 500, in the other market the HHI is 1,500. What must be true of these two markets?
A. The firms in the market in which the HHI is 1,500 have greater market power than do the firms in the market in which the HHI is 500.
B. There are more firms in the market in which the HHI is 1,500 than in the market in which the HHI is 500.
C. The firms in the market in which the HHI is 1,500 have less market power than do the firms in the market in which the HHI is 500.
D. The market in which the HHI is 500 is, by definition, an oligopoly but the market in which the HHI is 1,500 is not an oligopoly.
Answer: A
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What will be an ideal response?