# Calculating HHI index and C4 Ratio

An industry consists of 6 firms, with sales of $100,000, $500,000, $400,000, $300,000, 60,000, and $75,000. Now, suppose the two smallest firms merge.

a. Calculate the four-firm concentration ratio (C4) before the merger. Show your work.

b. Calculate the four-firm concentration ratio (C4) after the merger. Show your work.

c. Calculate the Herfindahl-Hirschman index (HHI) before the merger. Show your work.

d. Calculate the Herfindahl-Hirschman index (HHI) after the merger. Show your work.

e. Do you think the U.S. Department of Justice would try to block the merger?

https://brainmass.com/economics/principles-of-mathematical-economics/calculating-hhi-index-and-c4-ratio-371685

#### Solution Preview

Please refer attached file for better clarity of tables.

Pre Merger

Firm Sales % Share

1 100000 6.97%

2 500000 34.84%

3 400000 27.87%

4 300000 20.91%

5 60000 4.18%

6 75000 5.23%

Total 1435000

After merger

Firm Sales % Share

1 100000 6.97%

2 500000 34.84%

3 ...

#### Solution Summary

Solution describes the steps to calculate HHI index and four-firm concentration ratio in the given case. It also checks whether given merger will be blocked by U.S. Department of Justice.