The Business Activities of Firm a Confer Positive Externalities on Firm

question 378

Multiple Choice

The business activities of Firm A confer positive externalities on Firm B, and the business activities of Firm B confer positive externalities on Firm A. If the two firms merged, then

• A)their respective markets would move closer to the social optimum.
• B)their respective markets would move further away from the social optimum.
• C)total surplus in their respective markets would decrease.
• D)the merger would serve as an example of a misguided public policy toward externalities.

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