Micro2Solutions

Technologically efficient method produces a given

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Unformatted text preview: put by using the least inputs. All three methods are technologically efficient. Suppose there are only 4 firms in the Steel industry and 5 firms in the Coal industry. Use the following information to answer question 29: Steel Industry Firm A B C D Coal Industry Firm E F G H I Sales 350 300 250 100 Q29. The Herfindahl-Hirschman Index shows that a) b) c) d) e) The coal industry is more concentrated than the steel industry The steel industry is not highly concentrated The steel industry is more concentrated than the coal industry The coal industry is not highly concentrated None of the above Solution: c) The steel industry is more concentrated than the coal industry Steel Industry: Total sales = 350 + 300 + 250 + 100 = 1,000 Firm A’s market share = 350 / 1000 = 35% Firm B’s market share = 300 / 1000 = 30% Firm C’s market share = 250 / 1000 = 25% Firm D’s market share = 100 / 1000 = 10% HHI =35^2 + 30^2 + 25^2 + 10^2= 2850 Coal Industry: Total sales = 300 + 250 + 200 + 150 + 100 = 1,000 Firm E’s market share = 300 / 1000 = 30% Firm F’s market share = 250 / 1000 = 25% Firm G’s market share = 200 / 1000 = 20% Firm H’s market share = 150 / 1000 = 15% Firm I’s market share = 100 / 1000 = 10% HHI =30^2 + 25^2 + 20^2 + 15^2 + 10^2= 2250 Page 18 of 33 Sales 300 250 200 150 100 ©Prep101 www.prep101.com/freestuff Use the follo...
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