1. You are given the table below containing annual sales figures for three different industries in the most recent calendar year:

Firm Industry1 Industry2 Industry3

A $10,000 $70,000 $20,000

B $10,000 $4,000 $20,000

C $10,000 $3,000 $20,000

D $10,000 $3,000 $20,000

E $5,000 $2,000 $20,000

All Others 10 X $5,000 18 X $1,000 $0

For the first column All others means that there exists 10 firms with 5000$ sales each. Second column should be interpreted similarly

1. Compute the 4-firm concentration ratio for each industry. What does this index have to say about which industry is most concentrated?
2. Compute the Herfindahl-Hirschman Index (HHI) for each industry. What does this index have to say about which industry is most concentrated?
3. Why do you think the HHI does a better job than C4 of measuring industry concentration? Give two reasons for your answer and illustrate each by reference to the above table.