1%) The largest firm in Industry J has a 90% market share, while the remaining t

Question

1%) The largest firm in Industry J has a 90% market share, while the remaining ten firms each has a one percent share. The largest firm in industry K has a 80% market share, while the other two firms each has a 10% share. Which statement is true? A. Industry J has a higher concentration ratio than industry K. B. Industry K has a higher concentration ratio than industry J. C. The industries have the same concentration ratio. D. None of these statements are true IndustryX IndustryY Market Share Firm 10 19.) Using the above schedules, which statement is true? A. B. C. D. Industry X has a Herfindahl-Hirschman Index of 2400 Industry X has an H-H-I of 100 Industry X has an H-H-I of 80. Industry X has an H-H-I of 1,000. IndustryX IndustryY Market Share Market Share 30 30 Firm 2 10 10 10 10 20.) Using the above schedules, which statement is true? A. B. C. D. Industry Y has a Herfindahl-Hirschman Index of 95. Industry Y has an H-H-I of 100 Industry Y has an H-H-I of 1,000. Industry Y has an H-H-I of 2,738.

Explanation / Answer

Question 18

Industry J has 11 firms while Industry K has 3 firms. In order to determine which industry has higher concentration we have to calculate the concentration ratio.

There are two types of concentration ratio –

4-firm concentration ratio

8-firm concentration ratio

However, in given case, industry K has only 3 firms.

So, in this case, we will calculate 3-firm concentration ratio of both industries and then compare them.

In industry J, firm 1 has market share of 90% while all other 10 firms have market share of 10% each.

Concentration ratio = Market share of Firm 1 + Market share of Firm 2 + Market share of Firm 3

Concentration ratio = 90% + 1% + 1% = 92%

The 3-firm concentration ratio of Industry J is 92 percent.

In industry K, firm 1 has market share of 80% while firm 2 has market share of 10% and firm 3 has market share of 10%.

Concentration ratio = Market share of Firm 1 + Market share of Firm 2 + Market share of Firm 3

Concentration ratio = 80% + 10% + 10% = 100%

The 3-firm concentration ratio of Industry K is 100 percent.

Thus, Industry K has higher concentration ratio than Industry J.

Hence, the correct answer is option (B).

Related Questions

Navigate

• Browse (All)
• Browse 1
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.