Suppose That Two Firms in an Industry That Has a Herfindahl

question 253

Multiple Choice

Suppose that two firms in an industry that has a Herfindahl index of 1,000 announce a merger. The U.S. Justice Department concludes the merger will boost the index to 1,050. The antitrust authorities will most likely

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

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Definitions:

Partnership Assets

Resources owned by a partnership that are used in the operation of the business and are subject to division among partners according to the partnership agreement.

Income Sharing

A financial arrangement where earnings are distributed among individuals or groups based on a predetermined formula or agreement.

Unlimited Liability

Unlimited liability refers to the full responsibility of business owners to cover all debts and legal actions against the business, potentially using personal assets.

Liquidation

The process of converting assets into cash or cash equivalents by selling them, often used to pay off debts or in closing down a business.