Suppose That Industry a Has Two Firms of the Same

question 28

Multiple Choice

Suppose that Industry A has two firms of the same size and Industry B has three firms with 65 percent, 30 percent, and 5 percent market shares, respectively. Which of the following is true of the Herfindahl-Hirschman indexes for the two industries?

• A)The HHI for Industry A is 50 higher than the HHI for Industry B.
• B)The HHI for Industry A is 50 lower than the HHI for Industry B.
• C)The HHI for Industry A is 150 higher than the HHI for Industry B.
• D)The HHI for Industry A is 150 lower than the HHI for Industry B.
• E)The HHI is the same for both industries.

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Definitions:

Perfect Square Trinomial

A trinomial expression that is the square of a binomial, characterized by having three terms where two are perfect squares and one is double the product of the square roots of those squares.

Zero-Factor Property

A principle stating that if the product of two quantities is zero, then at least one of the quantities must also be zero.

Equation

An assertion in mathematics that two expressions, often containing variables and constants, are equivalent.

Trinomial

A polynomial equation or expression that consists of three terms.