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Basic Question 3 of 4
Which of the following is (are) NOT true?
II. The N firm concentration ratio is always smaller than or equal to one.
III. The reciprocal of the Herfindahl index indicates the equivalent number of firms in the industry.
IV. If the Herfindahl index of industry A is larger than that of industry B, A's concentration ratio must be larger than B's.
V. If the concentration ratio of industry A is larger than that of industry B, A's Herfindahl index must be larger than B's.
I. The Herfindahl index is always smaller than or equal to 1.
II. The N firm concentration ratio is always smaller than or equal to one.
III. The reciprocal of the Herfindahl index indicates the equivalent number of firms in the industry.
IV. If the Herfindahl index of industry A is larger than that of industry B, A's concentration ratio must be larger than B's.
V. If the concentration ratio of industry A is larger than that of industry B, A's Herfindahl index must be larger than B's.
User Contributed Comments 8
| User | Comment |
|---|---|
| Bududeen | very tricky |
| JepTang | Yep!! i was choosing between the 2 also. |
| jpducros | good question |
| frants54 | Sometimes you learn more from the questions than from the study material itself |
| robbiecow | Second frants54 on that one! |
| chesschh | If you get this right, cosider yourself a genious |
| tkluge24 | I think III could be viewed as being incorrect as well...it would need to specify that all firms have equivalent market share?? no?? |
| chen511 | III I think it's the original sentence in the material. |
I passed! I did not get a chance to tell you before the exam - but your site was excellent. I will definitely take it next year for Level II.
Tamara Schultz
Learning Outcome Statements
identify the type of market structure within which a firm operates and describe the use and limitations of concentration measures
CFA® 2025 Level I Curriculum, Volume 1, Module 1.