According to the text exhibit on concentration ratios and Herfindahl-Hirschman Indexes, which of the following industries has the lowest HHI? Select one: a. ice cream b. breakfast cereal c. motor vehicles and passenger car bodies d. medicinal chemicals and botanical products

A. ice cream

Explanation:

Herfindahl-Hirschman Indexes is an index used to determine the market concentration of one or more firms, the Herfindahl-Hirschman Indexes

It is calculated by squaring the market share of each of the competing firms in a market and then adding up the numbers obtained from the squared market share of each of the competing firm.

THE HERFINDAHL-HIRSCHMAN INDEXES VALUES RANGES FROM ABOUT ZERO TO NUMBERS UP TO TEN THOUSAND (10,000).

Explanation:

HHI means Herfindahl-Hirschman Indexes and is defined as a measure of the size of firms in relation to the industry and an indicator of the amount of competition among them, it is given by

∑ s²

The medicinal chemicals and botanical products has the lowest HHI of about 102

One way to measure the degree to which output in an industry is concentrated among a few firms is to use a concentration ratio, which reports the percentage of output accounted for by the largest firms in an industry. The higher the concentration ratio, the more the firms in the industry take account of their rivals’ behavior. The lower the concentration ratio, the more the industry reflects the characteristics of monopolistic competition or perfect competition.

The medicinal chemicals and botanical products industry is more competitive than icecream industry which has an HHI of 954

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