An Industry Has Five Firms, Each with a Market Share

Multiple Choice

An industry has five firms, each with a market share of 20 percent. There is no foreign competition, entry into the industry is difficult, and no firm is on the verge of bankruptcy. If two of the firms in the industry seek to merge, this action would most likely be opposed by the government because the Herfindahl index for the industry is

A) 2,000 and the merger would increase the index by 500.
B) 2,000 and the merger would increase the index by 800.
C) 2,500 and the merger would increase the index by 500.
D) 2,500 and the merger would increase the index by 1,200.