Consider a Market That Has Three Firms with the Following

question 43

Multiple Choice

Consider a market that has three firms with the following market shares:
Firm A 25 percent
Firm B 55 percent
Firm C 20 percent
Suppose Firm A wants to acquire Firm C so that the post-acquisition market would exhibit the following shares:
A + C = 45 percent
B = 55 percent
What is the change in the HHI resulting from the merger?

• A) 1,000
• B) 4,050
• C) 5,050
• D) No change

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Definitions:

Accounting Cost

The total amount of money or the monetary value of resources consumed or used in the process of generating revenue, as recorded in financial statements.

Residual Income

The income that remains after all costs and expenses, including any cost of capital, have been deducted.

Income from Operations

The profit generated from a business's core operational activities, excluding income from investments or secondary activities.

Activity Base

A measure used for allocating fixed costs to products or services, based on the activities that drive costs, such as machine hours or labor hours.