In What Situation Are the Department of Justice and Federal

question 24

Multiple Choice

In what situation are the Department of Justice and Federal Trade Commission most likely to challenge the merger between two competitors?

• A)When the Herfindahl index is close to 0 and the number of firms is large
• B)When targeted price discounts can be implemented by rival firms
• C)When the merger threatens to substantially increase market concentration
• D)When the merger threatens to substantially decrease market concentration
• E)In a large industry with many competitors, each having a relatively equal market share

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Definitions:

Very Inelastic

Describes a situation where the demand or supply for a good or service is minimally responsive to changes in price.

Very Elastic

Refers to a situation in which the demand or supply for a product changes significantly in response to price changes, indicating high sensitivity.

Elastic Demand Curve

A demand curve characterized by a high sensitivity of quantity demanded to changes in price, indicating that a small price change results in a large change in quantity demanded.

Heating Oil

A low viscosity, liquid petroleum product used as a fuel for furnaces or boilers in buildings.