The market share data for an industry, comprising five companies, is given below : This industry’s three-firms Herfindahl-Hirschman index shall be :Company Market Share (%) A 35 B 25 C 18 D 12 E 10
0.217
Option 2 — 0.217 is correct.
The Herfindahl-Hirschman Index (HHI) measures market concentration by summing the squares of the market shares of the firms considered. When shares are expressed as fractions (decimals), the index ranges from 0 (perfect competition) to 1 (pure monopoly). A "three-firm" HHI uses only the three largest firms.
The three largest firms are A (35%), B (25%) and C (18%). Converting to fractions and squaring:
HHI = (0.35)² + (0.25)² + (0.18)² = 0.1225 + 0.0625 + 0.0324 = 0.2174 ≈ 0.217.
Why the other options are wrong: 0.234 wrongly adds a fourth firm; 0.151 comes from summing squares of only two firms; 0.0175 confuses the index with an average share. Only the sum of the squared shares of the top three firms gives 0.217.
Takeaway: HHI = Σ(share)²; use decimal shares for a 0–1 scale and include exactly the number of firms specified.
Similar Questions
Match the items of List-I with the items of List-II and find the correct combination:
List - I
(Market Structure)List - II
(Nature of industry where prevalent)(a) Perfect competition (i) Aluminium and passenger cars (b) Oligopoly (ii) Public utilities like Telephones and Electricity (c) Monopoly (iii) Manufacturing : T.V. Sets, Refrigerators (d) Monopolistic competition (iv) Farm Products : Grains The Competition Commission of India has no role in regulating which of the following?
Consider the following statements:
(1) Exclusive dealing amounts to a restrictive agreement under the Competition Act, 2002.
(2) The rate of growth in the service sector in India is highest among all the other sectors of economy.
(3) Predatory pricing is not regulated under any law.
(4) A company using sales force promotion and trade promotion is using "Pull" strategy.
Indicate the correct answer out of the following:
Given below are two statements : one is labelled as Assertion (A) and the other is labelled as Reason (R).
Assertion (A) : In monopolistic competition, firms face a downward-sloping demand curve that is more elastic than under monopoly.
Reason (R) : In monopolistic competition, close substitutes of the product are available in the market.
In the light of the above statements, choose the most appropriate answer from the options given below :
The kinked demand curve theory of oligopoly suggests that :
For perfect competition, indicate the correct code for essential conditions from the following :
(a) Large number of buyers and sellers
(b) Perfect knowledge of the market
(c) Homogeneous product for sale
(d) Absence of transportation cost
(e) Freedom of entry and exit of buyers and sellers from the market
(f) Rational Behaviour of buyers and sellers
Code :
Important Questions from Business Competition
- Choose the correct section of the Competition Act, 2002 Which provides that 'No enterprise shall abuse its dominant position' :
- The remedies for the violation of Sections 3 and 4 of the Competition Act have been laid down under
Select the correct code of the following statements being correct or incorrect.
Statement (I) : The ‘law of one price’ states that in competitive markets free of transportation costs and barriers to trade, identical products sold in different countries must sell for the same price when their price is expressed in terms of the same currency.
Statement (II) : An ‘Efficient market’ has no impediments to the free flow of goods and services, such as trade barriers.
- Consider the following statements :
(a) The stage of industry's development (life cycle) cannot influence the nature of competitive rivalry.
(b) As the industry starts to mature in terms of life cycle, rules are rejected, consumer expectations about quality and performance are blurred and industry standards are put for modification.
(c) A major feature of maturing industries is the tendency for competition based on product pricing becoming similar.
(d) In declining industries, only the most efficient firms can earn reasonable profits.
In the light of Industry Life Cycle, which of the above statements are true ?
Codes : Match the items of List-I with the items of List-II and find the correct combination:
List - I
(Market Structure)List - II
(Nature of industry where prevalent)(a) Perfect competition (i) Aluminium and passenger cars (b) Oligopoly (ii) Public utilities like Telephones and Electricity (c) Monopoly (iii) Manufacturing : T.V. Sets, Refrigerators (d) Monopolistic competition (iv) Farm Products : Grains
