Question

Q1) Given the REVENUES of the 4 Hospitals in Jupiter:

1. Primary Care Services of Jupiter ($20 million)

2. JFK Emergency Care ($40 million)

3. Palm Beach Gardens Medical Center ($80 million)

4. Jupiter Hospital (3x the revenue of Primary Care Services of Jupiter)

Solve for the HHI of Jupiter area hospitals (rounded-off).

A) 0.1

B) 0.3

C) 0.5

D) 0.6

E) 0.7

Q2) Assume the HHI of hospitals in Port St. Lucie = 0.35. Which region shows a greater hospital market power?

Jupiter (QUESTION 1) ?

Port St. Lucie?

or

Orlando? (0.4577)

A) Port St. Lucie

B) Jupiter

C) Orlando

D) All regions have idential hh indeces

Q3) Which of the 3 regions has the most competitive hospital market?

A) Jupiter (Q1) ?

B) Port St. Lucie (Q2)?

or

C) Orlando (0.4577)?

D) All of the above

Answer 1

Q1)

Whether a market is oligopoly or not we determine the concentration ratio. However both the Justice department and the FTC both prefer to measure called the Herfindahl-Hirshman Index (HHI).The HHI is measured by taking the square for each firm’s share of market sales summed over the firms in the industry. A HHI below 1000 is very competitive, HHI between 1000 and 1800 are somewhat competitive and HHI above 1800 is called oligopoly.

HHI of JUpiter area hospital care industry is

The correct option is: B)

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Q2)

The higher the HHI the greater will be the market power, then as HHI of Orlando>HHI of St. L>HHI of Jupiter, the correct option is: C)

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Q3)

In the same argument the most competitive place is Jupiter. Then the correct option is: A)