Economics (MindTap Course List)
13th Edition
ISBN: 9781337617383
Author: Roger A. Arnold
Publisher: Cengage Learning
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Chapter 25.1, Problem 2ST
To determine
Determine the four-firm concentration ratio and Herfindahl index.
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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.)
Suppose that the top six firms in an industry have total annual sales of $250 billion, $210 billion, $150 billion, $120 billion, $80 billion,
and $60 billion, respectively.
Instructions: Round your answers to the nearest whole number.
a. What is the four-firm concentration ratio for this industry?
percent
b. What is the Herfindahl index for this industry? (Hint: To find the Herfindahl index, you will need to compute the percentage market
share for each firm in the industry. When calculating market share, do not round your intermediate calculations.)
Suppose an industry is composed of six firms. Four firms have sales of $10 each, and two firms haves sales of $5 each. What is the four-firm concentration ratio for this industry?
calculate HHI for this industry?
Chapter 25 Solutions
Economics (MindTap Course List)
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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): 23 percent, 22 percent, 18 percent, 12 percent, 11 percent, 8 percent, and 6 percent. What is the four-firm concentration ratio of the hamburger industry in this town? What is the Herfindahl index for the hamburger industry in this town? If the top three sellers combined to form a single firm, what would happen to the four-firm concentration ratio and to the Herfindahl indexarrow_forwardShow all fomulaesarrow_forwardSuppose an industry is composed of six firms. Four firms have sales of $10 each, and two firms have sales of $5 each. What is the four-firm concentration ratio for this industry?arrow_forward
- Nonearrow_forwardSuppose that the most popular car dealer in your area sells 2 percent of all vehicles. Instructions: Enter your answers as a whole number. a. If all other car dealers sell either the same number of vehicles or fewer, what is the largest value that the Herfindahl index could possibly take for car dealers in your area? b. In that same situation, what would the four-firm concentration ratio be? percentarrow_forwardIs it true that the four-firm concentration ratio puts more emphasis on one or two very large firms, while the Herfindahl-Hirshman Index puts more emphasis on all the firms in the entire market? Explain briefly.arrow_forward
- oligopoli 5.1 The following table represents the market share percent- age for each firm in a hypothetical industry. Firm Market Share A 15 C D E 20 B 6 12 7 H 19 11 F G 10 a. Calculate the four-firm concentration ratio for this industry. b. Calculate the Herfindahl-Hirschman Index (HHI) for this industry. c. Would the Justice Department consider this industry as unconcentrated, moderately concentrated, or concen- trated? Why?arrow_forwardWith formulaarrow_forwardIf the top two companies in the fast food industry merged, their new market share would equal 17% of the market. This industry's new HHI would be 845. According to the FTC's historical guidelines for mergers, would the FTC approve this merger? Select the correct answer below: Yes, the FTC would ignore the merger and allow it to go through. Maybe. The FTC would scrutinize the merger and make a case-by-case decision. No, the FTC would probably challenge the merger Give step by step answer with final solutionarrow_forward
- Suppose that a small town has six burger shops whose respective shares of the local market are (as percentages of all hamburgers sold): 26%, 20%, 18%, 14%, 12%, 10%, What is the four-firm concentration ratio of the hamburger industry and what is the Hirchmann Herfindahl Index (HHI) for the hamburger industry in this town?arrow_forwardEconomics Reference the following information about the market demand function for questions 1 to 15. These questions are on different types of market structures – monopoly, perfect competition, Cournot oligopoly market, and the Stackelberg oligopoly market. The market demand function is given the following equation: P = 2000 – Q where Q is the industry’s output level. Suppose initially this market is served by a single firm. Let the total cost function of this firm be given the function C(Q) = 200Q. The firm’s marginal cost of production (MC) is equal to the firm’s average cost (AC): MC = AC = 200. Now suppose the two firms engage in Stackelberg market competition. Assume firm 1 is the leader (first-mover) and firm 2 is the follower firm (second-mover). Marginal profit function of Stackelberg leader: 900−Q1 QUESTION 14: What will be the market price in this Stackelberg model? Group of answer choices $480 $650 $720 $900 QUESTION 15: Can you calculate the profit earned by the…arrow_forwardConsider a market with four firms. Suppose the first firm has a 39% market share, the second firm has a 30% market share, the third firm has a 20% market share, and the fourth firm has a 11% market share. Using the Herfindahl-Hirschman Index (HHI), what is this market's level of concentration? Now suppose the third and fourth firms propose to merge. Were they to merge, then the market's HHI would increase to? Given the increase in the HHI that would be caused by the proposed merger, would the government likely allow such a merger to occur?arrow_forward
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