### Exercise: Market Concentration**Assumption:**- There are 10 firms of equal size in an industry.**Tasks:****a) Change in Concentration Ratio**- If two of the firms merge, find the change in the concentration ratio. - **Concentration ratio change: [ ] %****b) Change in Herfindahl-Hirschman Index**- Find the change in the Herfindahl-Hirschman index. - **H-H index change: [ ]**### Explanation:This exercise involves calculating how market concentration changes when firms in an industry merge. It focuses on two key metrics:- **Concentration Ratio:** A measure that indicates the total market share owned by the largest firms in the industry.- **Herfindahl-Hirschman Index (HHI):** A common metric used to determine market concentration by squaring the market share of each firm and summing these values.Complete the blanks after performing the necessary calculations.

market share of 10 firms of equal size is 10% each.

Answered: ) If two of the firms merge, find the…

) If two of the firms merge, find the change in the concentration ratio: Concentration ratio change: |% ) Find the change in the Herfindahl-Hirschman index.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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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): 18 percent, 24 percent, 20 percent, 11 percent, 10 percent, 9 percent, and 8 percent. The four-firm concentration ratio for the hamburger industry in this town is percent. (Enter your response as a whole number.) The Herfindahl index for the hamburger industry in this town is (Enter your response as a whole number.) Suppose the top three sellers combined to form a single firm. The four-firm concentration ratio would be percent. (Enter your response as a whole number.) Suppose the top three sellers combined to form a single firm. The Herfindahl index would be (Enter your response as a whole number.)
What is the concentration ratio?
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