Suppose that a particular industry has a four-firm concentration ratio of 85 and a Herfindahl index of 3,000. Most likely, this industry would achieve

A) both productive efficiency and allocative efficiency.
B) allocative efficiency but not productive efficiency.
C) neither productive efficiency nor allocative efficiency.
D) productive efficiency but not allocative efficiency.

Question

bench badillo · Accepted Answer

Final Answer : C, Explanation :  The high four-firm concentration ratio of 85 and a Herfindahl index of 3000 suggest a market dominated by a few firms, likely leading to less competition. This typically results in neither productive nor allocative efficiency, as firms may not produce at the lowest possible cost (productive efficiency) or allocate resources in a way that maximizes consumer satisfaction (allocative efficiency).

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