If a Horizontal Merger Lowers the Cost of Production and Increases

question 111

Multiple Choice

If a horizontal merger lowers the cost of production and increases the total surplus in the market, which of the following is also likely to have occurred?

• A)The consumer surplus increased.
• B)The consumer surplus decreased.
• C)The producer surplus decreased.
• D)The producer surplus did not change.

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Definitions:

Retained Earnings

The portion of net income not distributed to shareholders but reserved by the company to reinvest in its core business or to pay debt.

Du Pont Identity

A financial analysis framework that breaks down Return on Equity (ROE) into three component parts—profit margin, asset turnover, and financial leverage—providing insights into a company's operational efficiency.

ROE

Return on Equity, an indicator of financial efficiency determined by dividing the net income by the equity of shareholders.

Balance Sheet

A financial statement that reports a company's assets, liabilities, and shareholders' equity at a specific point in time.