CFA Practice Question
Which statement(s) is (are) true regarding HHI?
II. In a monopoly the HHI is 10,000.
III. The advantage of the HHI is that it reflects all firms in the industry and it gives greater weight to the companies with larger market share.
IV. An industry is considered to be concentrated if its HHI is 2,500.
I. The HHI is always smaller than 10,000.
II. In a monopoly the HHI is 10,000.
III. The advantage of the HHI is that it reflects all firms in the industry and it gives greater weight to the companies with larger market share.
IV. An industry is considered to be concentrated if its HHI is 2,500.
Correct Answer: I, II, III and IV
User Contributed Comments 4
| User | Comment |
|---|---|
| GIJCFA | Answer 1 and 2 are conflicting. The 1st answer should read "The HHI is always smaller than or equal to 10000". |
| RichardWang | Well, Answer 1 talks about real market, so it is less than 10,000. But Answer 2 talks about threorical monopoly (which you don't find in real market), so "pure" monopoly is 10,000. The assumption is different, so they are NOT conflicting. |
| jmcarr02 | CFA 2008, Volume 3, page 271, Exhibit 2: HHI > 1800 : highly concentrated industry. |
| Drzewes | if for HHI higher than 1800 industry is concentrated then for sure it is concentrated for HHI=2500 |