An industry consists of three firms with sales of $300,000, $700,000, and $250,000

a) Herfindahl _ Hirschman Index (HHI) is a common measure of market concentration and is used to determine market competitiveness.It is calculated by squaring the market share of each firm competing in a market and then summing the resulting numbers.

Total sales of the industry:

$300,000 +$700,000+$250,000 = 1,250,000

Firm A: $300,000/$1,250,000 = 0.24

Firm B: $700,000/ $1,250,000 =0.56

Firm C: $250,000/$1,250,000 = 0.2

HHI = 10000(0.24)2 + (0.56)2 +(0.2)2

=10000(0.0576 + 0.3136+0.04)

=10000 × 0.4112

= 4112

Since HHI is greater than 2500,this industry is highly concentrated.

b) The C4 is ascertained by main four organization in piece of the pie.On the other hand, there are just three organizations exist in the business ,so there are no response for the four firm focus proportion (C4) for this situation .

C3 = $10000× ($300,000/ $1250,000+ $700,000/$1250,000 + $250,000/$1250,000)

=1