2. The table below reports the number of individuals covered in health plans offered by 6 health insurance firms A, B, C, D, E, and F operating in a given state. These are the only health insurance firms in that state. According to the guideline of Department of Justice, a market with a Herfindahl-Hirshman index (HHI) of less than 1,500 is considered a competitive marketplace, an HHI of 1,500 to 2,500 is moderately concentrated, and an HHI of 2,500 or greater is highly concentrated. (9 points)

Firm	A	B	C	D	E	F
Number of covered individuals	240,000	210,000	160,000	140,000	130,000	120,000

Using this data, answer the following questions:

a. Calculate the market share of each firm in this market (hint: consider the whole state as the market). [1 point]

b. Calculate the HHI of the health insurance industry in this state. [2 points]

c. Briefly discuss the extent of market concentration based on the HHI calculated in item b. [1 point]

d. Firms C and D are considering merging. Calculate the new HHI if firms C and D merge (hint: assume that firms C and D do not lose any of their clients after this merge and there are no changes in number of clients for other firms). [2 points]

f. Firms C and D completed their merger. Now firms A and B are considering merging. Recalculate the HHI after this proposed merger (hint: assume that firms A and B do not lose any of their clients after this merge and there are no changes in number of clients for other firms). Briefly discuss the effects of this merger on market concentration if it is completed (hint: use the guideline from the Department of Justice). [3 points]