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
The kinked demand curve theory of oligopoly suggests that :
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 :
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 :
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:
Important Questions from Business Competition
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.
Which one of the following is not true for introducing multiple brands in a category?
The shut down refers to complete cessation or closing down of the business. It involves which of the following?
i) No buying or selling
ii) No manufacturing
iii) Shifting of business from one place to another place
iv) Assets to be sold or disposed off
v) Returning capital to owners
Which of the following is a guideline to deal with colleagues?
Which of the following is a horizontal agreement?
