Calculation of Change in the HHI Associated with a Merger

question 53

Multiple Choice

Calculation of Change in the HHI Associated with a Merger The Justice Department has been asked to review a merger request for a market with the following four firms.
What is the HHI for the existing market?

• A)100
• B)160
• C)4,453.125
• D)11,400

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Definitions:

Marginal Cost

The financial outlay for making an additional unit of a product or service.

Average Total Cost

The total cost divided by the number of goods produced; it includes all variable and fixed costs.

Average Variable Cost

The total variable cost divided by the quantity of output produced; it varies with production levels.

Average Fixed Cost

The constant expenses associated with production, which remain unaffected by the amount of goods produced, divided by the number of items made.