113) Merger guidelines developed by the U.S. Department of Justice and the Federal Trade Commissionuse the Herfindahl-Hirschman Index as a measure of concentration. This index measuresconcentration in an industry byA) squaring the four-firm concentration ratio of the industry and dividing this number by thetotal number of firms in the industry.B) squaring the market shares of each firm in an industry and then adding up the values of thesquares.C) determining the market shares of the four largest firms in the industry, but unlike theconcentration ratio, the Index includes sales in the United States by foreign firms.D) adding up the market shares of all firms in the industry, squaring this number and thendividing by the number of firms in the industry.Answer: B
Diff: 1Page Ref: 505-506/505-506Topic: MergersLearning Outcome: Micro 14: Discuss production and pricing decisions within monopolies and how publicpolicies affect monopoliesAACSB: Reflective Thinking114) The Herfindahl-Hirschman Index is one factor used to determine whether a merger between twofirms should be allowed. Which of the following statements regarding the value of the Index for agiven industry is true?
Diff: 2Page Ref: 506/506Topic: MergersLearning Outcome: Micro 14: Discuss production and pricing decisions within monopolies and how publicpolicies affect monopoliesAACSB: Reflective Thinking