Question

Consider an industry that has five firms with the following market share percentages: 40, 20, 20,...

Consider an industry that has five firms with the following market share percentages: 40, 20, 20, 10, 10.

1. Calculate the four-firm concentration ratio for this industry. Show your work.

2. Calculate the Herfindahl-Hirschman index for this industry. Show your work.

3. Calculate the number equivalent for this industry. Show your work.

4. Would this industry be considered to be highly concentrated by the Department of Justice and the Federal Trade Commission? Why or why not?

5. Suppose there was another industry where the market share of the top three firms were the same as above, but the remaining 20% of the industry was made up of a thousand tiny firms, each with a market share of 0.02%. Rounded to the closest whole number, what would the HHI be? Show your work

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