1. There is an industry with 86 firms. One has 30% market share, and the remaining 70% of the market share is split equally between the other 85 firms. Calculate the Herfindahl-Hirschman Index (HHI) for this industry. Please show your work.
2. Is this industry either highly concentrated, moderately concentrated, or not concentrated?
3. There is an industry with 86 firms. One has 30% market share, and the remaining 70% of the market share is split equally between the other 85 firms. Say the large firm decides to merge with one of the smaller firms. By how much would this change the industry's HHI? Please show your work.
4. According to the guidelines presented in class, should the FTC either approve the merger, investigate the merger further, or challenge the merger?