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Chapter 23: Problem 14

An industry that is highly concentrated might have a Herfindahl-Hirschman index of (LO1) a) 20,000 d) 100 b) 2,000 e) 1 c) 800

Short Answer

Expert verified
b) 2,000

Step by step solution

01

Eliminate low HHI values

We know that for a highly concentrated industry, the HHI value should be relatively high (but not 10,000). Therefore, we can eliminate options with low HHI values: - d) 100 - e) 1 #Step 2: Compare the remaining options#
02

Compare the remaining options

We are now left with three options: - a) 20,000 - b) 2,000 - c) 800 Option a) has an HHI value of 20,000 which is outside the possible range of the HHI of 0 to 10,000. As a result, we can eliminate option a) as well. Now we have two remaining options: - b) 2,000 - c) 800 #Step 3: Select the most appropriate HHI value#
03

Select the most appropriate HHI value

Between the remaining two options, 2,000 (b) is a higher value closer to the higher end of the scale (10,000) and indicates higher concentration within the industry compared to 800 (c). Therefore, an industry that is highly concentrated might have an Herfindahl-Hirschman index of: b) 2,000

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Most popular questions from this chapter

According to the theory of the kinked demand curve, if a firm were to lower its price, its competitors would (LO3) a) lower theirs b) raise theirs c) keep theirs the same

Which statement is false? (LO1) a) The cigarette and auto industries have high concentration ratios. b) OPEC is a cartel. c) Most oligopolies engage in outright collusion. d) None of these statements is false.

Which statement is true? (LO4) a) All firms in oligopolistic industries are large. b) Most firms in the United States are oligopolies. c) The crucial factor in oligopolistic industries is product differentiation. d) Most of our GDP is produced by oligopolies.

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In the U.S. today collusion is \((\mathrm{LO} 2)\) a) illegal and does not exist b) illegal and does exist c) legal and does not exist d) legal and does exist
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