If Two Merged Firms Are Shown to Have a Higher

question 93

Multiple Choice

If two merged firms are shown to have a higher combined market value than the sum of their individual market values,then:

• A) there are economic gains.
• B) the firms were previously underpriced.
• C) the merger provides diversification to investors.
• D) there is no cost involved in the merger.

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Definitions:

Groupthink

A mental occurrence happening among a group where the need for consensus or conformity leads to unreasonable or ineffective decisions.

Foot-in-the-Door Technique

A persuasion strategy that involves getting a person to agree to a small request to increase the chances they will agree to a larger request later.

Robber's Cave Experiment

A social psychology experiment that illustrated how conflict can arise between groups and be resolved through cooperative tasks that achieve mutual goals.

Us-Them Hostility

Us-Them Hostility refers to the negative attitudes and behaviors directed towards members of an out-group, reinforced by strong in-group loyalties.