1. Consider an industry that is made up of nine firms each with a market share (

Question

1. Consider an industry that is made up of nine firms each with a market share (percent of sales) as follows:

Firm A: 30%

Firm B: 20%

Firm C, D, and E: 10% each

Firms F, G, H, and J: 5% each

What is the value of the Herfindahl – Hirschman Index and how is the industry categorized?

2. A vertical merger is one that takes place between two companies producing different goods or services for one specific finished product (true/false)

3. Suppose the government mandates the installation of certain types of pollution abatement equipment for the leather tannery industry. For some firms in the industry, installing the equipment may not be the most cost effective method of reducing pollution (true/false)

Explanation / Answer

1.

HHI=30^2+20^2+10^2+10^2+10^2+5^2+5^2+5^2+5^2=1700

at 1700,moderately concentrated industry

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