A Merger Adds Value by Creating Synergies

question 24

Multiple Choice

A merger adds value by creating synergies.Which of the following is not a possible source of synergy?

• A) Economies of scale
• B) Economies of vertical integration
• C) Combined complementary resources
• D) Diversification

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Definitions:

Fixed Costs

Costs that remain consistent regardless of production or sales volume, including rent, salaries, and insurance fees.

Variable Costs

Expenses that change in proportion to the activity or production level of a business.

Total Fixed Costs

The sum total of costs that are unaffected by changes in production levels or output.

Short-Run

A phase where production can be adjusted only by varying the amounts of variable inputs, with fixed inputs remaining constant.