The following three FIs dominate a local market and their total assets are given below. $$\begin{array} { | c | r | }
\hline \text { Institution } & \text { Asset Size } \
\hline \text { Bank A } & \text { \$50 million } \
\hline \text { Bank B } & \text { \$60 million } \
\hline \text { Bank C } & \text { \$90 million } \
\hline
\end{array}$$ What is the Herfindahl-Hirschman Index (HHI) for the local market?
A)1,000.
B)3,450.
C)3,550.
D)3,400.
E)60.

Question

The following three FIs dominate a local market and their total assets are given below. $$\begin{array} { | c | r | } 
\hline \text { Institution } & \text { Asset Size } \
\hline \text { Bank A } & \text { \$50 million } \
\hline \text { Bank B } & \text { \$60 million } \
\hline \text { Bank C } & \text { \$90 million } \
\hline
\end{array}$$ What is the Herfindahl-Hirschman Index (HHI) for the local market?
A)1,000.
B)3,450.
C)3,550.
D)3,400.
E)60.

Quizplus · Accepted Answer

The HHI is calculated by squaring the market share of each firm and then summing the results. Market shares are 25%, 30%, and 45% respectively. The HHI is $25^2 + 30^2 + 45^2 = 625 + 900 + 2025 = 3550$.

The Following Three FIs Dominate a Local Market and Their