26. If a concentration ratio for two industries is the same, we can conclude tha

Question

26. If a concentration ratio for two industries is the same, we can conclude that:

a. the HHI index must be the same for the two industries.

b. the HHI index is probably the same for the two industries.

c. the HHI index is probably not the same for the two industries.

d. both industries have the same number of firms.

Use the following information for questions 27 and 28.

There are five firms in an industry with sales at $14 million, $4 million, $4 million, $2 million,

and $1 million, respectively.

27. The first four-firm concentration ratio is:

a. impossible to calculate because there are five firms.

b. 96 percent.

c. 45 percent.

d. 4,806

28. The HHI for the industry is:

a. 96.

b. 925.

c. 2,083.

d. 3,728.

Explanation / Answer

Hi,

Please find the detailed answer as follows:

26) Option C ( the HHI index is probably not the same for the two industries) is the correct answer.

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27) First Four-Firm Concentration Ratio = (Sum of the first four firms with Highest Revenues)/(Total Revenue)*100 = (14 + 4 + 4 + 2)/(14 + 4 + 4 + 2 +1)*100 = 96%

Option B (96%) is the correct answer.

--------------------

28) HHI for the Industry = (Sum of the Square of Revenues of all the Firms in the Industry in Proportion to Total Sales)*10000 = [(14/25)^2+(4/25)^2+(4/25)^2+(2/25)^2+(1/25)^2]*10000 = 3728

Option D (3728) is the correct answer.

Thanks.

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