Suppose That Two Firms in an Industry with a Herfindahl

question 91

Multiple Choice

Suppose that two firms in an industry with a Herfindahl index of 5,000 announce a merger. The U.S. Justice Department concludes the merger will boost the index to 5,500. The antitrust authorities will most likely

• A)ignore this merger because of the relatively small increase in the Herfindahl index.
• B)allow the merger but watch the new firm carefully for future violations of the antitrust laws.
• C)allow the merger if foreign entry to the industry is possible.
• D)prevent the merger, contending that it violates the Clayton Act.

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Definitions:

Quantity Of Output

The total amount of goods or services produced by an individual, firm, industry, or entire economy in a given period.

Price To Charge

Price to Charge refers to the amount a business decides to set for its product or service, taking into account costs, competitive prices, and profit margins.

Marginal Costs

The additional cost incurred by producing one additional unit of a product or service.

Variable Costs

Costs that vary directly with the level of production, such as materials and labor, in contrast to fixed costs which remain constant regardless of production level.