The Following Three FIs Dominate a Local Market and Their

question 41

Multiple Choice

The following three FIs dominate a local market and their total assets are given below. If Bank A acquires Bank B, what is the new Herfindahl Index?

• A)60.
• B)100.
• C)5,800.
• D)5,050.
• E)6,525.

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Definitions:

Adverse Selection

A situation where sellers have information that buyers do not have, or vice versa, about some aspect of product quality.

Health Insurance

A type of insurance coverage that pays for medical and surgical expenses incurred by the insured individual, providing financial protection or reimbursement against losses from illness or injury.

Principal-Agent Problem

A dilemma in economics and organizational theory where one party (agent) is expected to act in the best interest of another party (principal) but may act in their own interest instead.

Profit Maximization

A business objective aiming to achieve the highest profit possible, guiding decisions on production, pricing, and investment.