Suppose an Industry Consists of Five Equal-Sized Firms

question 68

Multiple Choice

Suppose an industry consists of five equal-sized firms. Two of the firms plan to merge. The merger ______________ raise anti-trust concerns at the Justice Department given that the Herfindahl index before the merger was _____________ and the merger would cause the Herfindahl index to rise by __________.

• A)would; between 1,000 and 1,800; more than 100
• B)would; greater than 1,800; more than 100
• C)would not; less than 1,000; less than 300
• D)would not; between 1,000 and 1,800; less than 100

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Definitions:

Market Rate

The prevailing interest rate available in the marketplace on deposits, debts, or loans.

Nominal Rate

The Nominal Rate is the interest rate stated on a loan or financial product, not taking into account inflation or other factors that could affect the real value of the interest.

Premium

An amount paid in excess of a standard price or value, often related to insurance policies, bonds above par, or quality products.

Annual Amortization

The process of spreading out a loan or intangible asset cost over a specific period of time for accounting and tax purposes.