Merger Guidelines Developed by the U

question 119

Multiple Choice

Merger guidelines developed by the U.S.Department of Justice and the Federal Trade Commission use the Herfindahl-Hirschman Index as a measure of concentration.This index measures concentration in an industry by

• A)adding up the market shares of all firms in the industry, squaring this number and then dividing by the number of firms in the industry.
• B)squaring the market shares of each firm in an industry and then adding up the values of the squares.
• C)squaring the four-firm concentration ratio of the industry and dividing this number by the total number of firms in the industry.
• D)determining the market shares of the four largest firms in the industry, but unlike the concentration ratio, the Index includes sales in the United States by foreign firms.

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Definitions:

Total Liabilities

The sum of all financial obligations or debts that a company owes to external parties.

Total Assets

The sum of all assets owned by a company, including current, fixed, intangible, and other long-term assets, measuring its overall resources.

Current Assets

Items that are likely to be cashed in, sold, or expended within the span of one year or the standard operational period of the business.

Equipment

Tangible property owned by a business that is used in its operations to generate income, such as machinery or tools.