The Difference Between a Concentration Ratio and the Herfindahl-Hirschman Index

question 17

Multiple Choice

The difference between a concentration ratio and the Herfindahl-Hirschman Index (HHI) as measures of market concentration is that:

• A)the concentration ratio captures the degree of monopoly power while the HHI captures the level of advertising for the firms.
• B)the concentration ratio places heavier weight on larger firms in the industry.
• C)the concentration ratio does not distinguish between an industry with several equal sized firms and an industry with one large dominant firm.
• D)the HHI cannot capture the existence of a monopolist.
• E)all of the above are true.

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Definitions:

Production Costs

The total expenses incurred in the manufacture of products, including raw materials, labor, and overhead expenses.

Efficient Outcome

An economic situation in which all resources are allocated in the most beneficial way, leaving no room for further improvement without making someone worse off.

Economic Policies

Measures taken by a government to influence its economy, including monetary, fiscal, and supply-side policies.

President Hoover

President Hoover refers to Herbert Hoover, the 31st President of the United States, who served from 1929 to 1933, and is often remembered for his administration's response to the early years of the Great Depression.