Need questions 1 & 2 answered.

7:19 . ? [El 3 eversity.b|ackboard.com Home O) 6) Upload Assignment: Week 4 Wrap-Up Assignment EXAM PLE Table 1 Firm Total Revenue Market share (dollars) (total revenue/industry) Tattoo Time 450 17.1 My Tat 325 Love Lines 250 Native Birds 200 Next 16 firms (each) 50 Next 30 firms (each) 20 Industry 2,625 How to calculate The Herfindahl-Hirschman Index (HHI) The Herfindahl-Hirschman Index also called the HHI is the square of the percentage market share of each firm summed over the 50 largest firms (or summed over all the firms if there are fewer than 50 ) in a market. For example if there are fourfirms in a market and the market shares of the firms are 50 percent, 25 percent, 15 percent, and 10 percent, the HerfindahI-Hirschman Index is HHI = 502 + 252 +152 +102 = 3,450. In perfect competition, the HHI is small. For example, if each of the 50 largest firms in an industry has a market share of 0.1 percent, the HHI is 0.12 X 50 =0.5. In a monopoly, the HHI is 10,000 the firm has 100 percent of the market: 1002 = 10,000. The HHI became a popular measure of the degree of competition during the 19803, when the Justice Department used it to classify markets. A market in Table of Contents . The four-firm concentration ratio is 46.6. Calculate the HHI using the HHI formula. Based on Table 2, what is the market structure ofthe tattoo industry? (Perfect, monopoly, monopolistic, oligopoly) . What would the market structure of the tattoo industry be if each firm operated in a different city and the cities were spread across the nation (Hint: keep in mind there are only 50 firms in the industry) . What additional information would you need about the tattoo industry to be sure that it is an example of monopolistic competition? . Suppose that a new tattoo technology makes it easier for anyone to enter the tattoo market. How might the market structure change? . Based on your answer, why is it important to calculate the know the HHI as it relates to competition? 1:09 Mail AA & learn-us-east-1-prod-fleet01-xythos.c C Table 2 Market Structure Perfect Monopolistic Characteristics Competition Competition Oligopoly Monopoly Number of firms in industry Many Many Few One Product Identical Differentiated Identical or differentiated No close substitutes Or regulated Barriers to entry None None Moderate Hig h Firm's control over price None Some Considerable Cons iderable Concentration Ratio Low High 100 HH Close to 0 Less than 1,800 More than 1,800 10,000 Examples Wheat, corn Food, clothing Cereals Local water supply