Which of the Following Statements Regarding Monopoly Mergers Is False

question 16

Multiple Choice

Which of the following statements regarding monopoly mergers is false?

• A) It is often argued that merging with or acquiring a major rival enables a firm to substantially reduce competition within the industry and thereby increase profits.
• B) Financial researchers have found that the share prices of other firms in the same industry did not significantly increase following the announcement of a merger within the industry.
• C) While only the merging company benefits when competition is reduced, all companies in an industry pay the associated costs.
• D) Society as a whole bears the cost of monopoly strategies, so most countries have antitrust laws that limit such activity.

---

Definitions:

Financial Leverage

Engaging borrowed assets to increase the anticipated yield from an investment.

Operating Leverage

The degree to which a company uses fixed operating costs, where a higher degree indicates that a small change in sales will have a larger impact on operating income.

Capital Structure

The mix of a company's long-term debt, specific short-term debt, common equity, and preferred equity, which is a significant factor in determining a company's financial health and risk level.

Cost Structure

The composition of fixed and variable costs that a company incurs in the process of producing goods or services.