Exhibit 26-2 Market Shares Firms YerYear 2 Year 3 Year4 Year 5 35% 25% 17.5% 12.

Question

Exhibit 26-2 Market Shares Firms YerYear 2 Year 3 Year4 Year 5 35% 25% 17.5% 12.5% 10% 100% 50% 25% 15% 5% 5% 100% 30% 25% 20% 15% 10% 100% 25% 25% 20% 20% 10% 100'% 20% 2000 20% 20% 20% 100% Total Refer to Exhibit 26-2. The four-firm concentration ratio in Year1 was a. 90 percent. b. 95 percent. c. 70 percent. d. 100 percent. e. This cannot be determined from the 18. given data Refer to Exhibit 26-2. The industry's Herfindahl index in Year 3 was a. 3,250. b. 2,250 c. 2,000 d. 5,250. e. 1,250. 19.

Explanation / Answer

18) The four firm concentration ratio is the sum of shares of highest four firms

= 35% + 25% + 17.5% + 12.5%

= 90% '

Therefore a) 90 percent is the answer

19 ) In year 3,

HHI = 10000 * (0.32 + 0.252 + 0.22 + 0.152 + 0.12)

= 2,250

Therefore b) 2,250 is the answer

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