The Herfindahl Index Is Calculated By

question 36

Multiple Choice

The Herfindahl index is calculated by:

• A) adding the squared value of the market shares of all the firms in the industry.
• B) multiplying the squared value of the market shares of all the firms in the industry.
• C) adding the percentage of industry output produced by the largest four firms.
• D) adding the percentage of industry output produced by the largest eight firms.

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Definitions:

Barriers To Entry

Factors that make it difficult for new competitors to enter a market.

Net Social Cost

The total monetary cost of the negative externalities produced by an activity or production, minus any benefits.

Rent-Seeking Behavior

Activities aimed at increasing one's share of existing wealth without creating new wealth, often through manipulation or exploitation of the economic environment.

Profits

The financial gain realized when the revenue from selling goods or services exceeds the costs of production.