An industry has 50 firms, each with a market share of 2 percent. There is no foreign competition, entry into theindustry is difficult, and no firm is on the verge of bankruptcy.a. If 20 of the firms in the industry seek to merge, the Herfindahl index would change from120 to 1,600.120 to 200.200 to 1,720.1,720 to 1,720.b. This merger wouldnot be challenged.be challenged, because of the substantial change in the Herfindahl index only.be challenged, because of the value of the new Herfindahl index and the substantial change in the index.be challenged, because of the value of the new Herfindahl index only.

Change in the Herfindahl IndexThe Herfindahl Index (HHI) is a measure of market concentration, which…

Answered: An industry has 50 firms, each with a…

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter15: Oligopoly And Strategic Behavior

Section: Chapter Questions

Problem 12P

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Suppose that a small town has seven burger shops whose respective shares of the local hamburger market are (as percentages of all hamburgers sold): 26 percent, 24 percent, 20 percent, 12 percent, 9 percent, 6 percent, and 3 percent. Instructions: Enter your answers as a whole number. a. What is the four-firm concentration ratio of the hamburger industry in this town? Book percent Print b. What is the Herfindahl index for the hamburger industry in this town? erences c. If the top three sellers combine to form a single firm, what would happen to the four-firm concentration ratio and to the Herfindahl index? Four-firm concentration ratio = percent Herfindahl index =
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