Suppose that a small town has seven burger shops whose respective shares of the

Question

Suppose that a small town has seven burger shops whose respective shares of the local hamburger market are (as percentages of all hamburgers sold): 25%, 22%, 18%, 12%, 11%, 8%, and 4%.

a. What is the four-firm concentration ratio of the hamburger industry in this town? %.

b. What is the Herfindahl index for the hamburger industry in this town? .

c. If the top three sellers combined to form a single firm, what would happen to the four-firm concentration ratio and to the Herfindahl index?

     The four-firm concentration ratio would be %.

     The Herfindahl index would be . ( i get 4554 but its incorrect)

Explanation / Answer

A. Four Firm=.25+.22+.18+.12=.77=77%

B. HHI=.252+.222+.182+.122=.1577

C. Four Firm After Merger=.65+.12+.11+.08=.96=96%

HHI Post Merger=.652+.122+.112+.082=.4554

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