What is the Herfindahl-Hirschman Index (HHI) used for?
A. To measure inflation
B. To count population
C. To measure competition in a market
D. To determine taxes on goods
Answer (2)
The correct answer is letter C. To measure competition in a marketThe Herfindahl-Hirschman Index helps economists see how much control big companies have in a market. A high HHI means only a few companies dominate (oligopoly), while a low HHI means there is more competition, which is usually better for consumers.
The correct answer is C. To measure competition in a market.The Herfindahl-Hirschman Index (HHI) is a measure used to assess the level of competition within a market. It is calculated by summing the squares of the market shares of all firms in the industry.A higher HHI indicates less competition (more market concentration), while a lower HHI suggests a more competitive market with many smaller firms. It is commonly used by regulators to evaluate potential mergers and their impact on market competition.
