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xConnet Secure https/newconnect.mheducation.com/flow/connect.html k my work mode: This shows what is correct or incomect forthe work you have completed so fer it does not or incorrect for the work indicate completion. Return to question Suppose that a small town has seven burger shops whose respective shares of the local hamburger market are (as percentages of all hamburgers soldi 27% 26% 22%, 12% 7% 4% and 2 Instructions: Enter your answers as whole numbers a. What is the four-firm concentration ratio of the hamburger industry in this town? 3 Answer is complete but not entirely correct. 100% O b. What is the Herfindahl index for the hamburger industry in this town? Answer is complete and correct. 2.102 c. If the top three sellers combined to form a single firm, what would happen to the four-firm concentration ratio and to the Herfindahl index? 3 Answer is complete but not entirely correct. Four-firm concentration rab0 96% Herfindahl index - 5,566 Prey 1 of 4 Next

Solution

a) Four-firm concentration ratio: CR4 = Percentage of industry sales accounted for by four largest firms

Four-firm concentration ratio = 0.27 + 0.26 + 0.22 + 0.12

Four-firm concentration ratio = 0.87

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b) Herfindahl index = 27² + 26² + 22² + 12² + 7² + 4² + 2²

Herfindahl index = 2,102

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C) Four firm concentration ratio = ( 0.27 + 0.26 + 0.22) + 0.12 + 0.07 + 0.04

Four firm concentration ratio = 0.98

Herfindahl index = 75² + 12² + 7² + 4² + 2²

Herfindahl index = 5838