There Were Initially Two Satellite Radio Providers in the U

question 75

Multiple Choice

There were initially two satellite radio providers in the U.S. market, Sirius and XM Radio. The firms merged to form one firm, and the federal government did not challenge the merger. Although the merger created a single seller in this market, the existence of a monopoly may not have much impact on U.S. consumers. Which of the following statements are plausible reasons for the limited impact of the merger?

• A) There are very large fixed costs in providing satellite radio, and the industry may be a natural monopoly. One seller may be able to operate at lower cost than two sellers.
• B) Although there will only be one seller of satellite radio, there are other forms of radio broadcasts available to U.S. consumers and demand for satellite radio may be relatively elastic.
• C) The merged firm will operate at higher capacity and may be able to reduce costs through economies of scale and perhaps learning-by-doing, which will benefit U.S. consumers.
• D) all of the above

---

Definitions:

Start-Up Costs

Expenses incurred during the process of establishing a new business or project.

One-Time Activities

Non-recurring events or transactions that do not form part of the regular, ongoing operations of a business.

New Facility

A newly constructed or established building or infrastructure intended for a specific use or service.

Deferred Payment

A payment arrangement that allows the payer to make the payment at a future date, often after receiving the goods or services.