The Herfindahl Index Solves Which Problem with the N-Firm Ratio

question 29

Multiple Choice

The Herfindahl index solves which problem with the N-Firm ratio?

• A)Inaccuracy when dealing with more than 4 firms
• B)Inability to measure concentration if market shares are split evenly
• C)Inability to measure concentration across borders
• D)Invariance with changes in the size of the largest firms
• E)High variability when firm sizes are small

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Definitions:

Line Segment

A part of a line that is bounded by two distinct end points, and contains every point on the line between its endpoints.

Buyers' Value

The maximum amount a purchaser is willing to pay for a good or service, reflecting the perceived utility or satisfaction from the purchase.

Price Comparison

The action of comparing prices of specific goods or services across different sellers or providers, aiming to find the most cost-effective option.

Line Segment

A part of a line that is bounded by two distinct endpoints, and contains every point on the line between its endpoints.