Suppose that the most popular car dealer in your area sells 2.50 percent of all vehicles. Instructions: Enter your answers as whole numbers. a. If all other car dealers sell either the same number of vehicles or fewer, what is the largest value that the Herfindahl index could possibly take for car dealers in your area?

Largest Herfindahl index = 27

Explanation:

2.50% in whole numbers = 3%

To maximize the Herfindahl Index simply means having industry with concentration as much as possible. With the largest firm controlling only 3%, the way to have the rest of the industry be as concentrated as possible would be for there to be 2 other firms that each also controlled 3% of the market (for a total of 3 firms each controlling 3%). ,

Largest Herfindahl index = Number of firms * percentage square for each firm

the Herfindahl index = 3*(3²) = 27

Explanation:

If all other car dealers sell either the same number of vehicles or fewer, what is the largest value that the Herfindahl index could possibly take for car dealers in your area?

The Herfindahl index- 400 Largest ((4 squared) * 25) If other overall car dealers sells their cars as much as the biggest and number one car dealer i.e 4%, so the entire car dealers in this sector sell at 4% which would enable only for the 25 firms (25=100% (total) divided by 4).

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