Consider a Market That Has Three Firms with the Following

question 105

Multiple Choice

Consider a market that has three firms with the following market shares:
Firm A 15 percent
Firm B 25 percent
Firm C 60 percent
Suppose Firm B wants to acquire Firm A so that the post-acquisition market would exhibit the following shares:
B + A = 40 percent
C = 60 percent
What is the change in the HHI resulting from the merger?

• A) 750
• B) 4,450
• C) 5,200
• D) No change

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Definitions:

Accounting Equation

The fundamental equation of double-entry bookkeeping: Assets = Liabilities + Shareholder's Equity, used to ensure that a company's financial statements are balanced.

Stockholder

An individual or entity that owns one or more shares of stock in a corporation, making them partial owners of the company.

Assets Increase

A situation where the value or volume of a company's assets rises due to acquisition or appreciation.

Operating Activities

Transactions and events that relate to the primary operations of the company, including cash received from customers and cash paid for expenses.