The Ranking of Industries by the Four-Firm Concentration Ratio Usually,but

question 101

Multiple Choice

The ranking of industries by the four-firm concentration ratio usually,but not always,reveals the same pattern as ranking by HHI.When a discrepancy is found it is usually due to the following:

• A) The four-firm concentration index contains data on only the largest four firms, while the HHI is based on data for all firms in the industry.
• B) The HHI is based on squared market shares, while the four-firm concentration ratio is not.
• C) The four-firm concentration index contains data on only the largest four firms, while the HHI is based on data for all firms in the industry and the HHI is based on squared market shares, while the four-firm concentration ratio is not.
• D) The two indices are designed to measure two different attributes of markets.

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Definitions:

Cash Reserves

Funds that a person or entity keeps on hand to meet short-term and emergency funding needs.

Medium of Exchange

An instrument or system used to facilitate the sale, purchase, or trade of goods and services between parties.

Currency

A medium of exchange that facilitates trade and is usually issued by a government as legal tender.

Nonbanking Public

The segment of the economy that does not include banks or financial institutions, generally referring to average consumers and businesses.